Chinatrust Financial Holding Co (中信金控), which owns the nation’s largest credit card issuer, yesterday reported a meager 2.5 percent year-on-year rise in pre-audited net profit for the past three quarters to NT$13.2 billion (US$400 million), or NT$1.36 per share.
“We’re facing an unprecedented financial crisis and a gloomy economic outlook, although Chinatrust Financial has suffered limited impact from the crisis,” Daniel Wu (吳一揆), a senior vice president at the firm, told a media briefing.
Anticipating slower sales in the upcoming quarters, Chinatrust Financial said it could see mild growth for the full year, yet hoped to outperform the NT$13.34 billion in net profit reported last year.
“We are expecting opportunities to provide advisory services to help manage rich people’s wealth once the government’s cut in inheritance taxes helps attract their capital inflows,” said Hsu Miao-chiu (許妙靜), the company’s chief financial officer.
As financial headwinds have driven down the valuation of peer financial institutions, the financial service provider also expressed great interest in acquiring local financial institutions, including insurers and securities brokerages and one of two city commercial banks in China in the near future.
Wu said the mega bank was scheduled to conduct primary due diligence checks on the two Chinese city-level commercial banks this month, which could lead to its taking a maximum 25 percent stake in one of the banks once cross-strait financial deregulation accelerates.
Four of Chinatrust Financial’s overseas subsidiaries in the US, the Philippines, Canada and Indonesia are also touting acquisition opportunities, Wu said, without elaborating.
Chinatrust Financial, however, may soon suffer a loss of up to NT$320 million from its banking subsidiary Chinatrust Commercial Bank’s (中國信託商銀) sales of Lehman Brothers-linked structured notes to some 300 domestic investors after Sept. 1, as banks are required by the Financial Supervisory Commission to reach reconciliatory agreements with investors.
“We hope to settle agreements with these 300 customers by the end of the fourth quarter,” Hsu said. “And we may book losses in the fourth quarter if necessary.”
The banking unit of Chinatrust sold NT$16.9 billion in structured notes linked to Lehman Brothers to local investors.
For the past three quarters, Chinatrust Commercial Bank, nevertheless, remained the main driver of revenues for the parent company, contributing NT$12 billion in pre-tax revenues. In the third quarter alone, it saw a 14 percent year-on-year growth in commercial loans and a 16.7 percent year-on-year growth in fee incomes generated by credit cards.
As of the end of September, the bank had NT$132.5 billion in total assets under management.
Chinatrust Commercial Bank’s strength in wealth management, however, weakened. The bank posted a 30 percent year-on-year decline in income generated from wealth management businesses for the third quarter at NT$6.38 billion.
In spite of hard financial times, Chinatrust Financial’s finances were sound and it vowed not to lay off any employees, Hsu said.
BNP Paribas (法銀巴黎證券) said in a note to its clients yesterday that it recommended a “hold” on Chinatrust Financial stock.
The French brokerage said Chinatrust Financial’s sharp reversal of loss to gain in the third quarter was because of accounting leeway, which allowed it to wipe out an estimated NT$4.6 billion loss from its balance sheet from investments in Mega Financial Holding Co (兆豐金控) equities.
BNP Paribas further expressed concerns over the company’s future litigation case and higher Lehman Brothers-related damage to its earnings in the fourth quarter. It cut its target price to NT$9.80.
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