WEALTH MANAGEMENT | Cesar Tordesillas, Hong Kong

Fubon's net profit for 1H09 down by 60%

Fubon Bank and its subsidiaries reported a net profit of US$13 million for the first half of 2009, with the global financial crisis and the ensuing recession negatively impacting on the Bank's earnings.

Despite net interest income recording strong growth during the first half of 2009, this was offset by lower net fee and commission income and high credit costs due to the fall in market-related activities and weak credit conditions. As a result, the Bank's financial performance for the first half of 2009 fell by 60 percent versus first half of 2008 when the Bank registered record interim earnings of US$32.2 million, but improved substantially against a net loss of US$19.3 million in the second half of 2008, on account of the favorable interest rate environment and lower impairment charges on loans and available-for-sale investment portfolios.

Earnings per share decreased to US$.00649, compared to US$.0276 per share for the first half of 2008.

Gross interest income decreased 26 percent to US$111.22 million for the first half of 2009 whereas gross interest expense decreased 58 percent to US$371.3 million over the corresponding period. As a result, net interest income grew by US$8.77 million or 13 percent to US$77.4 million.

The increase in net interest income was bolstered by the increase in average interest-earning assets and widening of Hong Kong dollar Prime-HIBOR spread. Benefiting from lower funding cost in the near-zero interest rate environment and pricing of assets with higher spreads, effective net interest margin improved by 15 bps to 2.05 percent from 1.90 percent for the first half of 2008.

Other operating income decreased 54 percent year-on-year to US$19.48 million from US$42.8 million in the first half of 2008. During the first quarter, the volatility in equity markets and depressed market sentiments significantly reduced investors' appetites for investment products. As a result, stock broking related fee income as well as commission income from the sale of wealth management products, encompassing financial markets investment and structured products, unit trusts and insurance were adversely affected and declined in line with the general trend.

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