Taiwan Cooperative expects growth

The improving economy at home and abroad would benefit core businesses and limit the need for provisions, the bank-focused conglomerate said

State-run Taiwan Cooperative Financial Holding Co (合庫金控) yesterday said that it is looking at stable profit growth this year, as the improving economy at home and abroad would benefit core businesses and reverse loss-making overseas operations.

The bank-focused conglomerate gave the guidance during an online investors’ conference and said that economic scenes appear less murky, limiting the need for provisions.

Taiwan’s GDP growth this year is predicted to rise more than 3 percent, much faster than last year’s 1.32 percent.

Net income last year totaled NT$17.88 billion (US$558.92 million), or earnings of NT$1.17 per share, company data showed.

The results represented declines of 14.12 percent and 15.22 percent from their levels in 2022, mainly due to provision costs for operations in Cambodia and elsewhere, Taiwan Cooperative Financial president Chen Mei-tsu (陳美足) said.

“Cambodia emerged from the pandemic in a slower-than-expected fashion,” prompting the lender to raise provision costs in the second and third quarters of last year to shore up its capital strength, officials said.

Things started to stabilize in the fourth quarter, when overseas operations squeezed a tiny profit, they said.

A string of rate hikes by the US Federal Reserve also pushed up funding costs more rapidly than the rise in interest income, officials added.

That explains why its main subsidiary, Taiwan Cooperative Bank (合作金庫銀行), last year saw its net income fall 14.95 percent to NT$16.3 billion, despite trading gains from financial products — including foreign exchange swaps — soaring nearly 200 percent.

Foreign exchange swaps generated more than NT$9 billion in profit, but might drop to NT$7.5 billion this year, they said.

This is due to Taiwan’s central bank last week unexpectedly raising interest rates by 0.125 percentage points and given that the US Federal Reserve might lower rates to support the US economy, officials added.

The narrowing difference between the interest rates of Taiwan and the US is unfavorable for swap revenue, officials said.

Even without the provision costs, Taiwan Cooperative Financial would record a net income increase of almost 20 percent, indicating that core businesses remain healthy, Chen said.

High funding costs also affected the results of Taiwan Cooperative Securities Co Ltd (合庫證券) and Taiwan Cooperative Bills Finance Corp (合庫票券), officials said.

In contrast, its venture capital and life insurance units saw robust improvement in their earnings ability, they added.

Taiwan Cooperative Financial said it plans to distribute a cash dividend of NT$0.65 per share and another stock dividend of NT$0.35 from last year’s net income, suggesting a payout ratio of 85 percent.

The plan is still pending approval from a shareholders’ meeting later this year.