State-run Chang Hwa Commercial Bank (CHB) aims to raise bond holdings and loans to small and medium-sized enterprises (SMEs) in the second half of this year to support its profit margin, company officials told an investors’ conference on August 30.

The lender is also to limit its mortgages primarily to first-home buyers, and expects investment gains from currency swap operations to sustain, as the US Federal Reserve has no intention of rate cuts this year, it said.

“We are cautious, but positive about profit growth,” CHB spokesman Chen Bin told an online investors’ conference. “We are not focused on whether the Fed will make another rate hike in 2023, but rather how long the high-interest-rate environment will last.”

To ensure recurrent and fixed incomes, the bank is to build up positions on medium and long-term bonds in case a turnaround in monetary policies next year or later weighs on interest income, Chen said.

The remarks came after the Taipei-based bank reported a 31.78 percent spike in net income to NT$7.01 billion (US$220.05 million), or earnings per share of NT$0.65, for the first six months of 2023.

Interest income drove 56.39 percent of the earnings, although the contribution shed 4.79 percent from a year earlier due to higher funding costs, the officials said.

Fee income generated 13 percent of earnings and investment gains accounted for 30 percent, thanks to its currency swap operations, they said.

Net interest income, a critical gauge of profitability for banking institutes, weakened from 0.89 percent in the first quarter to 0.85 percent in the second quarter, due to higher funding costs, the officials said.

Net interest income could rise as the bank seeks to bolster syndicated loans and lending to SMEs, which generate better profit margins, Chen said.

Loans to SMEs grew 4.96 percent in the first half of this year, while lending to large corporations and government agencies rose 12.12 percent and 6.57 percent respectively, CHB data showed.

Lending at offshore and overseas banking units soared 23.47 percent, it showed.

CHB mortgages fell 1.19 percent, in line with the government’s effort to cool the property market.

The bank has no exposure to cash-strained Chinese developer Country Garden Holdings Co or asset management firm Zhongzhi Enterprise Group Co, nor has it sold their debts or other financial products to Taiwanese customers, the officials said.

CHB’s exposure to China stood at 17.1 percent of its assets as of June, lower than the sector’s average, they said, adding that existing real-estate loans are with Taiwanese firms, which maintain normal operations and honor interest payments.

Taipei Times