贝尔斯登--台湾金融行业研究报告2008年1月

1628

收藏 2008-06-13

Taiwan Financials Cheap for Good Reasons &#1048708; LOW VALUATION CAUSED BY UNCERTAINTIES IN EARNINGS OUTLOOK. Most of the Taiwan financial groups underperformed the market in 2007, and our coverage group is still trading at a 2008E P/BV below 1.6x. We believe there remain some uncertainties in the earnings outlook of Taiwan financials for 2008. These include trends in loan growth, net interest margin, asset quality, insurance premium growth and investment returns, and subprime-related provisions. &#1048708; INITIATE COVERAGE AT MARKET WEIGHT. In view of a potential increase in loan loss provisions for unsecured lending and additional provisions for subprime and related securities, our earnings forecasts show a slow rise in ROE for the financial holding companies during 2008-09. Our Gordon Growth Model also indicates that current valuations look demanding. We initiated coverage of the Taiwan financials sector with a Market Weight rating. &#1048708; INITIATED COVERAGE OF SEVEN FINANCIAL GROUPS. We recently initiated coverage of Chinatrust, Fubon, and Cathay with Outperform ratings. We also initiated coverage of First and E.Sun with Peer Perform ratings, and SinoPac and Shin Kong with Underperform ratings. &#1048708; CHINATRUST, FUBON, AND CATHAY OUR TOP PICKS. We expect these three financial groups to have a long-term sustainable ROE of over 15%. We believe this will be achieved through strong loan growth, high net interest margin, and solid fee income base and/or dominant life insurance business. In addition, each of these firms has an extensive overseas network, which should help them to generate new business opportunities in the next few years.Table of Contents Page Executive Summary...................................................................................................................................................5 Introduction ...............................................................................................................................................................9 The Banking Business .............................................................................................................................................11 Growth Driver (1): Strong Growth in OBU and Offshore Loans......................................................................12 Growth Driver (2): Net Interest Margin to Bottom Out ....................................................................................19 Growth Driver (3): Room for Expansion in Fee Income...................................................................................23 Growth Driver (4): Tight Cost Control .............................................................................................................29 Key Risk (1): Mixed Picture in Asset Quality...................................................................................................32 Key Risk (2): Subprime and Related Exposures ...............................................................................................37 The Insurance Business ...........................................................................................................................................39 Growth Driver (1): Investment-linked Life Products........................................................................................40 Growth Driver (2): Demand Driven by Stable GDP Growth............................................................................42 Growth Driver (3): Economies of Scale Count .................................................................................................45 Growth Driver (4): Overseas Opportunities ......................................................................................................49 Key Risk (1): Uncertainty in Investment Return...............................................................................................52 Key Risk (2): Limited Room for Improvement in Efficiency Ratios................................................................57 Valuation and Stock Recommendations..................................................................................................................59 Stock Performance ...........................................................................................................................................60 Valuation: Bank Financial Holding Companies................................................................................................62 Valuation: Insurance Financial Holding Companies.........................................................................................64 Recommendations ............................................................................................................................................67Companies ...............................................................................................................................................................69 Chinatrust Financial Holding Co. Ltd.: Toward a Full Recovery in 2008 ........................................................70 E.Sun Financial Holding Co. Ltd.: Fast Growth but ROE Continues to Lag....................................................79 First Financial Holding Co. Ltd.: A Steadily Growing Bank............................................................................87 Fubon Financial Holding Co. Ltd.: The Best Group Integration Model ...........................................................96 SinoPac Financial Holdings Co. Ltd.: Limited Growth Drivers .....................................................................105 Cathay Financial Holding Co. Ltd.: The Largest Financial Holding Company in Taiwan.............................114 Shin Kong Financial Holding Co. Ltd.: Deep into Subprime .........................................................................123 All pricing is as of the market close on January 16, 2008, unless otherwise indicated.