SinoPac hopes to double earnings after IBT takeover

SinoPac Financial Holding Co (建華金控), the nation's 10th largest financial holding company, expects to double its earnings next year after its takeover of smaller rival International Bank of Taipei (IBT, 台北商銀), which should be completed by the year's end, the company said yesterday.

"We expect to create earnings of over NT$10 billion [US$309.5 million], or around NT$1.5 per share, next year, which will be equivalent to 12 percent of our book value of NT$90 billion after the merger," SinoPac president and chief executive officer Paul Lo (盧正昕) said on the sidelines of the company's provisional shareholder meeting yesterday.

SinoPac's performance, however, seemed to be lagging behind its projections, with earnings amounting to NT$2.47 billion, or NT$0.61 per share, in the first seven months of this year. This accounts for just 44.9 percent of the company's predicted earnings of NT$5.56 billion for the year.

IBT, meanwhile, had a pre-tax net income of NT$2.16 billion, or NT$0.97 per share, during the January-July period.

By SinoPac hopes to save NT$600 million and boost profits by NT$900 million through the integration of information-technology systems, Lu said

Shareholders both financial institutions yesterday approved the merger deal through a full share swap, allowing each IBT share to be traded for 1.36 SinoPac shares. SinoPac will be the surviving entity with IBT becoming the financial holding company's wholly-owned subsidiary.

IBT will control 42.3 percent of the stakes in the merged SinoPac, while current SinoPac shareholders will hold the remainder. The share-swap process will start in November and will be finalized by the end of the year, Lo said.

SinoPac retain dual branding for its expanded banking operations until a new name is approved by shareholders in June next year, he said.

The merger is expected to make SinoPac the nation's eighth largest financial-services provider with over NT$1 trillion in assets. Its total number of outlets will be expanded to 161, including 32 overseas branches, the company said.

Lo he hoped the company's asset value will grow by 15 percent to 20 percent, which could nudge SinoPac up to the No. 7 position in the local market.

This would make it one of the seven financial-service providers to survive the government's policy of halving the number of financial holding companies by the end of next year.

Despite company's optimism, market watchers appeared to be less bullish about the partnership, citing uncertainties after the merger.

"SinoPac Holdings is no longer the company with which investors were familiar ... investing in a company without a basic understanding of its major shareholder's vision or agenda is very risky," Jesse Wang (王嘉樞), a finance analyst at BNP Paribas Securities Taiwan Co, said in a report released earlier this month.

The French securities house suggested that investors sell SinoPac shares, cutting its target share price to NT$13.15 from NT$17.6 to reflect the financial-service provider's disappointing second-quarter results and a lack of insight into SinoPac's new major shareholder.

SinoPac rose 0.94 percent to NT$16.05 on the Taiwan Stock Exchange yesterday, while IBT closed 1.91 percent higher at NT$16.05.