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Polaris shares boosted by reports of Citigroup interest

Shares of Polaris Group (寶來集團) and its banking arm, the Bank of Overseas Chinese (華僑銀行), strengthened on the local bourses yesterday amid reports it was in intensive partnership talks with Citigroup.

Flagship unit Polaris Securities Co (寶來證券) closed up 2.6 percent at NT$13.75 on the Taiwan Stock Exchange, while Bank of Overseas Chinese rose 3 percent to NT$7.15 on the over-the-counter market.

"Taiwan's banks and securities houses that are stuck in the small local market have an urgent need to internalize," Polaris Securities vice chairman Peter Huang (黃古彬) said in a telephone interview yesterday.

Huang confirmed that executives of Citigroup's brokerage arm visited Polaris Securities on Tuesday and were briefed on the company's plans.

"We are open to a future strategic alliance, but nothing is tangible at the moment," Huang said.

PARTNERSHIP POTENTIAL

Citigroup was originally interested in investing in the Bank of Overseas Chinese, in which Polaris Group holds about a 40 percent stake, the Chinese-language Commercial Times reported yesterday.

Citigroup was considering extending a possible partnership to the brokerage business at that time, the report said.

The US banking giant declined to comment on the alleged deal.

Citigroup Taiwan said in February that it would continue to seek acquisition opportunities to deepen its penetration into the local market.

Polaris Securities is to raise NT$4.2 billion (US$127 million), or the equivalent of a 25 percent stake at NT$12 per share, in October, to boost its capital adequacy in order to support its expansion plans.

Huang said the fundraising was basically targeted at current shareholders and employees and he did not expect Citigroup to participate.

Huang, however, said that the Bank of Overseas Chinese was in urgent need of fresh capital to enhance asset quality and that it preferred foreign investors who could afford to offer better prices.

"We expect to raise NT$5 billion to NT$6 billion, or the equivalent of nearly a 50 percent stake, preferably through the issuance of preferred shares in a private placement by the year's end at the earliest," the lender's spokesman Weng Chien (翁健) said in a telephone interview.

The bank was engaged in talks with one to two European institutions and a US financial institution, Weng said.

However, he declined to name the interested institutions because of confidentiality agreements.

OTHER RIVALS

HSBC Holdings Plc and ABN AMRO Bank were reportedly interested in investing in the lender, but Citibank won the priority to make its offer.

The bank's sales channels and strength in foreign exchange are attractive to foreign investors, said Chu Yu-chun (朱玉君), an analyst who tracks the financial sector with SinoPac Securities Corp (建華證券).

Partnership with foreign rivals would be a positive for the bank, as the deal could introduce money and know-how, she said.

The Bank of Overseas Chinese has 55 branches nationwide; 53 of those are licensed to do foreign exchange transactions, according to the bank.
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