Cathay Financial Holding Co (國泰金控), the nation’s biggest financial services provider, saw its net profit plunge 80 percent year-on-year to NT$6.88 billion (US$225.6 million) in the first quarter of this year, as its flagship unit Cathay Life Insurance (國泰人壽) drifted into the red due to its massive foreign exchange losses.
The life insurer lost NT$2.34 billion in the first three months after incurring losses due to the volatility in the New Taiwan dollar against the US dollar, the insurer said on Wednesday.
The NT dollar appreciated 2.18 percent against the US dollar in January, as traders expected the US Federal Reserve to slow the pace of its rate hikes, the insurer said.
Photo: CNA
However, the local currency depreciated rapidly versus the greenback in February, as high inflation and strong employment in the US prompted market speculation that the Fed might raise interest rates again, the insurer said.
The volatility in rates caused hedging costs against foreign exchange risks to rise and led to significant losses at Cathay Life Insurance, it said.
Cathay Life Insurance registered a loss of NT$2.6 billion for the first two months of this year, although it turned a profit of NT$260 million last month by using proxy hedging tools to manage its foreign exchange costs and by generating more recurring income, it said.
The life insurer said its foreign exchange reserves topped NT$42 billion at the end of last month, which would help absorb foreign currency losses and give it more flexibility in management.
However, Cathay United Bank (國泰世華銀行) saw its cumulative net profit rise 33 percent annually to a record NT$9.17 billion in the first quarter, after rate hikes by Taiwan’s central bank helped it gain 25 percent additional net interest income from a year earlier, the company said.
As private consumption rebounded after the COVID-19 pandemic, the bank recorded rising credit card spending and earned more net fee income, it said.
Although the bank ended its 10-year co-branded credit card partnership with Costco Wholesale Taiwan Ltd, it introduced a new credit card to retain customers.
The lender said it had 6.38 million valid credit cards in circulation as of the end of last month, the highest among its peers.
Cathay Century Insurance Co (國泰世紀產險) registered a net loss of NT$580 million during the first quarter, due to compensation payments to COVID-19 policyholders, it said.
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