State-run Mega Financial Holding Co (兆豐金控) yesterday stood by a 3 percent loan growth target for this year, as monetary tightening, geopolitical tensions and other uncertainty could affect an economic environment that is currently improving.
The bank-focused conglomerate maintained the target even though loan growth already exceeded that aim in the first quarter, with bad loans also picking up at large-cap borrowers, as well as small and medium-sized enterprises.
Net income in the first three months of the year rose 7 percent from a year earlier to NT$11.49 billion (US$355.75 million), or earnings of NT$0.8 per share, making it the most profitable state-run financial institution.
Photo courtesy of Mega Financial Holding Co
“We aim to retain that leadership position by enhancing core operations while pursuing a more balanced development,” Mega Financial president Hsiao Yu-mei (蕭玉美) told an online investors’ conference.
Interest income at its main subsidiary, Mega International Commercial Bank (兆豐銀行), rose 3 percent year-on-year, while fee income soared 82 percent, the group’s financial statements showed.
The improvement came after overall lending expanded 7.3 percent — with loans to large corporations rising 9.9 percent, small and medium-enterprise financing increasing 5.7 percent and mortgage operations gaining 3.7 percent, company data showed.
Mega Bank would press ahead with its emphasis on syndicated loans and international financing while reaching out to first-time homebuyers, officials said.
Foreign-exchange swaps, a major profit driver in the past two years, would slow this year, as the differences in interest rates between Taiwan and the US ease slightly after the central bank in March raised rates 0.125 percentage points, officials said, adding that the gap would drop further if the US Federal Reserve lowers interest rates as widely believed.
The issue poses a big uncertainty given that inflation is becoming sticky in the US, officials said.
With interest rates at high levels, it is difficult to adjust to a favorable lending structure by raising demand deposits and lowering time deposits, officials said.
The brokerage arm Mega Securities Co (兆豐證券) proved a bright spot with a net income of NT$890 million, representing a 91 percent spike from a year earlier.
The impressive showings came amid TAIEX rallies, which inflated the investment portfolio and trading gains, officials said.
Enhancing nonbanking operations fell in line with the group’s effort to diversify its income sources and pursue a more balanced development, Hsiao said.
Mega Financial would raise its stakes in US government bonds to capture benefits linked to interest rate cuts, officials said.
Mega Financial is to distribute NT$1.5 per share in cash dividends and another NT$0.3 in stock dividends from last year’s earnings, making it an attractive and reliable investment target, officials said.
Shares in Mega Financial yesterday shed 2.01 percent to NT$39, deeper than the main board’s 0.9 percent retreat and the financial sector’s 1.76 percent fall, Taiwan Stock Exchange data showed.
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