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Bank takeover sparks doubts over financial forecast

E. Sun Commercial Bank (玉山銀行), a banking arm of E. Sun Financial Holding Corp (玉山金控), yesterday formally took over the debt-ridden Kaohsiung Business Bank (高雄企銀), sparking doubts of whether the deal would force the holding company to revise downward its financial forecast.

E. Sun Commercial Bank, with Prudential Plc as its second-largest shareholder, outbid seven other bidders in late May to acquire the bankrupt Kaohsiung Business Bank for NT$3.7 billion.

The government's Financial Restructuring Fund (金融重建基金) agreed to compensate E.Sun by absorbing NT$13.4 billion (US$400.7 million) of the distressed lender's estimated NT$17 billion losses.

The Financial Restructuring Fund was set up in 2001 to help clean up bad loans and bail out failed banks.

E. Sun spokesman Du Wu-lin (杜武林) told the Taipei Times yesterday that he could not disclose the details but promised to "clarify the fiscal situation by Wednesday."

Kaohsiung bank has a total of 60 branches nationwide and the merger deal allows E. Sun to increase the number of its branches from 54 to 114, only next to Fubon Financial Holding Co's (富邦金控) 121 branches around the nation.

Du said E. Sun is authorized to relocate 38 branches to northern Taiwan as the distressed Kaohsiung Business Bank was highly concentrated in Kaohsiung and Pingtung.

"With the relocation plan, E. Sun is able to evenly extend the service network nationwide and achieve the best effects from the merger," he explained.

According to E. Sun's statistics, it earned NT$501 million in August, with the accumulated figure from January to last month standing at NT$4.18 billion, around 70 percent of the annual target of NT$5.97 billion.

Its after-tax earnings per share (EPS) for the first eight months was NT$1.84; while it previously earmarked NT$2.38 in EPS by the end of the year.

Media speculations apparently did not affect investors' confidence as E. Sun's shares rose NT$0.4 to close at NT$20.2 on the TAIEX yesterday.
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