Contents

Investment summary 3
Lacklustre environment 3
Recapitalisation concerns have eased 4
Stress test on profitability and capital strength 5
Valuation and catalysts 5
Stock picks 7
Margin compression: a longlasting
phenomenon 8
Excess liquidity 8
NIM likely to bottom in 3Q but full recovery some way off 9
Weaker margin improvement in a rate hike cycle 10
HSBC coverage 10
NPL risk deferred, but it has
not disappeared yet 12
A better-than-expected 1H 12
NPLs by category 13
What could go wrong? 13
1H09 NPL status review 14
Recapitalisation risk: easing
but not resolved 16
Overall CAR strengthened 16
Recapitalisation still desirable 18
BIS capital requirements 18
Stress test on profitability and
capital adequacy 20
Stress test methodology 20
Profitability 20
Capital adequacy levels 21
2Q09 performance review 22
Company profiles 25
Chinatrust FHC (2891.TW) 26
Fubon FHC (2881.TW) 29
Cathay FHC (2882.TW) 32
Mega FHC (2886.TW) 35
First FHC (2892.TW) 38
Yuanta FHC (2885.TW) 41
SinoPac FHC (2890.TW) 44
Shin Kong FHC (2888.TW) 47
Disclosure appendix 52
Disclaimer 55