Fubon Bank expects Taiwan business to drive earnings growth

PUBLISHED : Monday, 26 March, 2007, 12:00am
UPDATED : Monday, 26 March, 2007, 12:00am

Fubon Bank (Hong Kong), the locally listed unit of Taiwan's Fubon Financial Holdings, expects its fast-growing Taiwan-related business to sustain the lender's growth despite having gained a foothold in the mainland.

'In three years, Taiwan business will probably account for more than 20 per cent of the bank's net profit,' chief executive Lee Jin-yi said.

Taiwan-related business at present accounts for 10 per cent to 15 per cent of the bank's operating income, but less than 5 per cent of net profit.

'We actually see growth coming in 2007,' Mr Lee said.

However, analysts question the bank's growth prospects without a presence in the mainland and they do not expect any breakthrough in the near future given the political tension across the Taiwan Strait.

It has been four years since Fubon Financial bought the former International Bank of Asia and turned it into Fubon Bank to be used as a springboard for expansion in the mainland.

The bank is still waiting for regulatory approval to set up a representative office in Dongguan, Guangdong province.

Mr Lee agreed his bank lagged behind other Hong Kong lenders in dealings with the mainland but insisted expansion across the border was still a 'strategic priority' for the company.

'We are looking at different options, such as whether to set up a subsidiary, participating through the acquisition of a mainland financial institution or commercial bank or becoming a strategic partner,' Mr Lee said.

There has been market speculation that Fubon Bank was planning to invest in Xiamen City Commercial Bank.

'We are talking to various parties right now,' Mr Lee said, without going into detail.

He said the bank had to satisfy all regulatory bodies to be able to move into the mainland, '[but] so far, we haven't encountered any issue for us to say we should not do this'.

Meanwhile, Mr Lee said plans to build the local unit into a regional product for the group's clients in Hong Kong, the mainland and Taiwan had started to bear fruit.

He attributed the strong earnings growth - up 36 per cent last year - to the efforts Fubon had made in transforming from a local consumer finance lender into a more diversified bank, becoming involved in wealth management and corporate banking.

The bank's Taiwan-related loans, including lending to Taiwanese customers for use in the mainland, increased 152 per cent to HK$1.6 billion last year, while Taiwan-related wealth management accounts rose 119 per cent to 3,611.

Mr Lee said Taiwanese customers would account for 40 per cent of the bank's roster of wealth management clients by the end of this year from zero in 2005.

Fubon Bank aims to set up an asset management company this year to provide more sophisticated services to meet client demands.

It will employ about 170 staff, bringing the bank's total to 1,100.