Fri, Mar 17, 2006 - Page 12 News List

Jih Sun shares surge on speculation over alliance

RUMOR The share price surged after a Chinese-language newspaper reported that a Japanese bank was interested in the small financial group

By Amber Chung  /  STAFF REPORTER

Shares of Jih Sun Financial Holding Co (日盛金控) soared on the local bourse yesterday, after local press said that the nation's smallest financial group may form a strategic alliance with Shinsei Bank Ltd of Japan in the near future.

Jih Sun Financial closed up 4.72 percent at NT$7.10 on the GRETAI Securities Market yesterday.

"We are in talks with many interested local and foreign investors at the moment, not only Shinsei Bank," Jih Sun Financial's vice president of public affairs Clemens Chung (鍾芳程) said in a phone interview yesterday.

The company has not made any decisions on the matter yet, Chung said, declining to comment further.

The Chinese-language Apple Daily reported yesterday that Shinsei Bank has been in close contact with Jih Sun Financial since last year and conducted due diligence on the deal last month.

Jih Sun Financial said last year it wanted to draw foreign investors through a private placement. The funds to be raised could amount to NT$5.5 billion (US$170 million), which is equivalent to a 20 percent increase in capital stock currently worth NT$27.5 billion, the report said.

The rumored deal would be Shinsei Bank's third attempt at investing in Taiwan as it underbid Taishin Financial Holding Co (台新金控) for a 22.5 percent stake in state-controlled Chang Hwa Bank (彰化銀行) last July, and Newbridge Capital of the US and Nomura Group of Japan for a combined 26.5 percent stake in Taishin Financial last month.

Major units of Jih Sun Financial, one of the nation's three biggest financial services providers, include Jih Sun Securities Co (日盛證券) and Jih Sun International Commercial Bank Co (日盛商銀).

A partnership would help Jih Sun Financial strengthen its capital flow by cleaning up a NT$12.5-billion loss incurred following the sale of bad loans by its weaker banking unit, said Chu Yu-chun (朱玉君), an analyst who tracks the local finance sector at SinoPac Securities Corp (建華證券).

Chu, however, does not recommend Jih Sun Financial shares, as he believes the uncertainties surrounding the deteriorating consumer credit situation and the possible passage of a bankruptcy law would hurt the small finance players worst.

Jih Sun Financial generated net income of NT$434 million, or NT$0.203 per share, for the first two months of this year. The company posted a net loss of NT$4.40 billion, or a loss of NT$2.065 per share, last year.

The financial group could remain in the red this year if it cannot get fresh capital to cover its loss, Chu said.

The nation's finance sector has seen robust foreign investment in local banks since the beginning of this year, as the government is pushing for consolidation and wants at least one local bank to be run by foreign investors.

Singapore-based Temasek Holdings Ltd agreed to pay US$400 million for a 15 percent stake in E.Sun Financial Holding Co (玉山金控) earlier this week, after General Electric Co, the world's second-largest company by market value, bought up to 24.9 percent of Cosmos Bank (萬泰銀行) for over NT$9 billion in January.

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