Cosmos shares soar on possible investment

Shares of debt-ridden Cosmos Bank (萬泰銀行) soared yesterday after a newspaper said business tycoon Terry Gou (郭台銘), the nation's second-richest man, planned to invest in Taiwan's biggest cash card issuer.

Cosmos shares rose by nearly seven-percent limit-up to NT$10.15 on the Taiwan Stock Exchange yesterday, compared with a 1.01-percent decline on the benchmark TAIEX.

"The fundraising through private placement is underway. We have no comments about the report because of the confidentiality agreement," the bank said in a filing to the TSE yesterday.

Cosmos spokesman Shih Kung-liang (施坤良) had not returned calls as of press time.

The Chinese-language Commercial Times reported yesterday that Gou, founder and chairman of Hon Hai Precision Industry Co (鴻海精密), the world's largest contracted electronics manufacturer, was teaming up with with General Electronics Co (GE) and unnamed private equity funds to invest between NT$20 billion (US$611 million) and NT$27.3 billion in Cosmos.

GE's affiliate GE Consumer Financial is currently the single largest shareholder of the local lender with a 10 percent stake.

"I have not heard anything about such plan from Gou," Hon Hai spokesman Edmund Ding (丁祁安) said in a phone interview yesterday.

Ding said he could not confirm whether Gou was planning such an investment, as he speaks for the company and not for individual shareholders.

In a bid to reduce the firm's widening financial gap, shareholders of the capital-strapped Cosmos last month approved a plan to raise NT$15 billion in three stages by the year's end and NT$12.3 billion by the end of the second quarter of next year.

Last week, the Financial Supervisory Commission said the bank was expected to receive a one-time capital injection of nearly NT$30 billion from a group of investors by the end of September.

As of May, Cosmos had a deficit of NT$3.17 billion and had a bad loan ratio of 6.68 percent -- far beyond the average of 2.33 percent in the banking sector, government data showed.

Deteriorating asset quality amid the fallout of mounting bad debts has driven small local banks to seek fresh funds and improve fragile financial structure.

On Tuesday, Ta Chong Bank (大眾銀行) announced that a consortium led by US buyout firm Carlyle Group had agreed to pour NT$21.5 billion into the bank for a 36 percent holding and a majority of board seats.

The Carlyle deal came after Asian buyout company Longreach Group's purchase of a 51 percent stake in EnTie Commercial Bank (安泰銀行) for NT$18.8 billion last month.