Cathay Financial Holding Co (國泰金控) said yesterday its exposure to the Middle East remains limited and manageable despite heightened geopolitical tensions and rising inflationary pressure.
Internal stress tests under multiple scenarios show the group’s capital position would remain within regulatory requirements even under a prolonged inflation environment triggered by regional conflicts, president Lee Chang-ken (李長庚) told an investors’ conference in Taipei.
Neither the group’s banking unit nor its insurance arm holds Iranian sovereign debt, Lee said, adding that its life insurance subsidiary has no exposure to overseas private credit and the bank does not invest in such products.
Photo: CNA
Four investment funds offered through the group hold related assets with net exposure of about US$100 million, Lee said.
Cathay United Bank Co (國泰世華銀行), the conglomerate’s main lending arm, holds about NT$2.8 billion (US$87.83 million) in Middle Eastern sovereign bonds, he said.
Concerns over private credit products have largely centered on whether large-scale withdrawals could trigger a chain reaction of redemptions. However, Lee said the current market structure is stronger than during the global financial crisis in 2008.
He said he has not observed signs of large-scale redemption pressure, and product structures and subscription and redemption rules are now more robust and tightly regulated.
Most investors remain in profit despite market volatility, Lee said, adding that the company would continue to monitor financial markets and geopolitical developments.
Lee said the worst-case scenario would involve the complete closure of the strategic Strait of Hormuz, which would disrupt shipments of crude oil and natural gas.
For now, the waterway remains partially open, as Iran has allowed oil tankers to pass under certain conditions, reportedly charging about US$2 million per large tanker.
The fee translates to roughly US$1 per ton, meaning oil prices could remain manageable even if crude rises to US$120 per barrel, provided traffic through the strait continues, Lee said.
Cathay Financial reported a net income of NT$107.6 billion for last year, down 3 percent from a year earlier, largely due to a one-off foreign exchange reserve provision booked in December by its main subsidiary, Cathay Life Insurance Co (國泰人壽). Earnings per share were NT$7.06.
Despite the decline, the group said its core operations remained strong, with its banking, property insurance and securities units all posting record profits.
Cathay Life acting president Lin Chao-ting (林昭廷) said the insurer plans to gradually increase its exposure to Taiwanese equities over the long term, focusing on stocks with stable dividend payouts, while expanding investments in infrastructure projects and other Taiwan dollar-denominated assets.
Cathay Life realized NT$114.8 billion in gains from equity investments last year, representing a return of 16.4 percent.
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