State-run Mega Financial Holding Co (兆豐金控) yesterday said it is not expecting loan growth this year, but would seek profit improvement by adjusting its loan structure to avoid credit risks amid economic uncertainty at home and abroad.
The bank-focused conglomerate announced its approach after net income last year declined 29 percent annually to NT$18.34 billion (US$600.07 million), dragged by COVID-19 insurance claims at its non-life insurance arm Chung Kuo Insurance Co (兆豐產險). The results translated into earnings per share of NT$1.32.
“We will cautiously deal with loans that will likely stay flat this year,” Mega Financial Holding president David Hu (胡光華) told an online investors’ conference.
Photo: Lee Chin-hui, Taipei Times
The group aims to boost profitability by focusing on loan structure adjustments and operations that generate better yields, as fears build over financial stability in the US and Europe.
Mega Financial said it has no exposure to troubled Silicon Valley Bank and First Republic Bank in the US, or Credit Suisse Group AG’s Additional Tier 1 (AT1) debt that would be wiped out under a merger deal with UBS Group AG.
However, Mega Financial Holding does own Credit Suisse debt that has higher priority for payment, the company said.
To bolster its risk control, Mega Financial Holding has cut purchases of bail-in bonds, raised thresholds for bond investments and closely follows lending with tech start-ups, it said.
Nevertheless, North America has grown into the largest profit driver among overseas and offshore banking operations with a 60 percent share and would continue to carry heavy weight, thanks to strong demand for US dollars and interest rate hikes, Hu said.
Although the US Federal Reserve is slowing monetary tightening, interest rates would remain high in light of stubborn inflation, which is favorable for currency swap operations that generated sizeable profit last year, the company said.
Furthermore, main subsidiary Mega International Commercial Bank (兆豐銀行) would add to its operations in Southeast Asia, where Taiwanese firms have increased their presence in the past few years amid a global supply chain realignment, it said.
In retail banking, Mega Bank would expand digital accounts among young people and gain high-net-worth clients, the company said, adding that the lender ranks in the top three in Taiwan by number of affluent clients.
Mega Bank has no intention of adding to home loans this year and would limit operations mostly to first-home buyers and people with real demand, as property transactions are set to fall, it said.
Mega Financial Holding has not yet discussed its dividend policy, but it would not differ much from last year, Hu said.
Its retained earnings and reserves are more than NT$100 billion, allowing it to issue a decent cash dividend despite unrealized losses of NT$15.33 billion, company data showed.
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