State-controlled Taiwan Business Bank (TBB, 臺灣企銀) is engaged in talks with several potential overseas investors, hoping to draw fresh foreign funds amid its ongoing recapitalization program geared toward boosting capital adequacy, the bank said yesterday.
It also seeks to form strategic partnerships with foreign rivals to introduce know-how and novel financial products in the future, TBB chairman Soo Jin-fong (
TBB, the 11th-biggest of the 43 banks in Taiwan, yesterday held its first investor conference since it was established more than 90 years ago.
Addressing some 180 institutional investors, Soo said that the bank planned to raise NT$10 billion (US$302 million) to help lift its capital adequacy ratio to 11.53 percent from 10.46 percent.
The bank plans to offer a 7 percent discount on the closing share price on either Oct. 19, 21 or 23 to interested subscribers.
TBB said it hoped to sell new shares at NT$12 per share. Its stock closed up 5.91 percent at NT$10.85 on the Taiwan Stock Exchange yesterday.
Analysts expressed concern over the bank's less than ideal customer base and asset quality.
"The likelihood that foreign investors would favor TBB shares is slim, as small and medium enterprises [SMEs] with relatively weak credit make up the bulk of its loan mix," said Peter Hsieh (謝杰良), an analyst with Polaris-Protime Securities Consultants (寶來普泰投顧).
SME loans make up 30 percent of TBB's NT$750 billion lending balance, while government and state-run company loans account for 35 percent. SME customers had a bad loan ratio of 4.86 percent, according to the bank's data.
The bank incurred a loss of NT$11.5 billion from the sale of bad loans awaiting amortization in the next five years, in addition to NT$18.8 billion in non-performing loans as of the end of last month, the data showed.
"With such asset quality, the bank needs to revamp itself if it wants to be intriguing to foreign investors," said Shirley Yang (楊慶祺), a fund manager at Invesco Taiwan Ltd (景順投信).
The mounting bad debts and losses are also deterring larger state-controlled
rival Mega Financial Holding Co (兆豐金控) from joining the fundraising and
increasing its 14.38 percent stake in TBB.
Mega Financial said last month that it would partake in the recapitalization
in proportion to its current stockholding, raising its stake to 26 percent
by the year's end.
Soo said yesterday that the outlook for a merger between Mega Financial and
TBB remained uncertain.
TBB generated a pre-tax income of NT$819 million for the first nine months
of this year and expected a profit of around NT$1.6 billion for the year.