Taishin offers securities supported by mortgages

Taishin International Bank (台新銀行), a banking unit of Taishin Financial Holdings Co (台新金控), yesterday closed a securities sale worth NT$4.725 billion (US$142.3 million). The deal is backed by residential mortgages.

"The share sale will greatly improve the bank's financial asset transparency and return on assets," Julius Chen (陳淮舟), president of Taishin Financial, said yesterday.

Taishin's sale is the nation's second securitization plan backed by residential mortgages, after First Commercial Bank (第一銀行) on the first of this month sold residential mortgage-backed securities valued at NT$4.28 billion.

The government in 2002 passed the Real Estate Securitization Statute (不動產證券化條例), allowing the repackaging of assets such as residential mortgages, car loans and credit-card receivables.

The property-backed securitization project by Taishin attracted a wide range of financial institutions, including banks, insurers and trust-and-bill finance companies, Chen said.

"Since more investors [than expected] were interested in buying, all shares have been sold," he said.

According to Taishin, the bank's asset-backed securities carry a weighted average yield of 1.73 percent, with a weighted average duration of 2.47 years.

Taishin said that most of the deal's residential mortgages are collateralized with housing units located in the greater Taipei and Taoyuan areas, where property prices are stable.

The securitization project is also the first of its kind to be backed by government-subsidized mortgages, which account for 22 percent of the total, the bank said.

Taishin Financial plans to launch more deals in the second half of the year. Its subsidiary companies own commercial buildings valued at NT$20 billion.

Earlier this month, the bank and Test Rite International Co (特力集團) announced plans to securitize a Test Rite office building -- Time Plaza (美孚時代通商大樓) -- on Zhongxiao East Road in Taipei.

That was the first property-backed securitization project targeting pre-sold housing units for the bank. The project was expected to launch in June, Taishin chairman Thomas Wu (吳東亮) said at the time. Taishin will submit an application to the Ministry of Finance for approval in the middle of next month, Wu said.

Gary Tseng (曾國烈), the ministry's director-general of the Bureau of Monetary Affairs, yesterday lauded the banking sector's aggressiveness in launching asset-based securitization plans.

He said that financial asset securitization plans will contribute not only to the financial sector's credit profile but also to its internal risk management control.

Tseng urged the nation's mid-term and long-term loan providers to take part in the emerging securitization market.

As the deal's organizing bank, Citibank Taiwan (花旗銀行) said yesterday that this will be a profitable deal for Taishin because issuing banks receive, on average, interest income of 3.5 percent on mortgage loans while they pay a yield of only 1.73 percent to investors.