Union Bank succeeds in plan to raise NT$4 billion

The Union Bank of Taiwan (聯邦銀行) announced yesterday it had completed a plan to raise NT$4 billion (US$121 million) in funding, a filing with the Taiwan Stock Exchange showed.

The local lender said it had raised the funds via a private placement, adding that it would use the new capital to improve its financial structure and enhance its capital adequacy ratio.

The placement will increase the bank's capitalization to NT$23.19 billion from NT$19.19 billion.

The bank plans to lift its capital adequacy ratio, or Bank of International Settlements (BIS) ratio, which measures a bank's financial strength, to more than 10 percent, Union Bank executive vice president Herman Tu (涂洪茂) said yesterday in a telephone interview.

SHARES RISE

Shares in Union Bank rose NT$0.25 or 3.19 percent to NT$8.08 on the local stock market yesterday soon after the filing was submitted to the stock exchange.

On Sept. 7, the board of Union Bank passed a plan to raise new capital through the issue of 400 million preferred shares at NT$10 per share.

While many foreign institutions have tapped into Taiwan's banking industry and participated in the recapitalization plans of several local lenders, Tu said that Union Bank was not interested in bringing foreign strategic investors on board.

"We did not extend invitations to foreign investors to participate in the capitalization plan," Tu said.

Tu didn't elaborate on why foreign investors had not been sought, but Union Bank president Jeff Lin (林鴻聯) said earlier this year that the bank refused to relinquish its present management in its drive to recapitalize.

Under yesterday's filing, Union Bank said its new preferred shares had all been subscribed by affiliated companies that are either controlled or managed by the bank's board of directors and existing major shareholders.

RETAIL BANKING

Union Bank, established in 1992, is a small commercial bank concentrating on the retail banking business.

The bank has seen its capitalization and profitability weakened in the wake of the consumer loans crisis.

The bank had NT$6 billion in non-amortized losses for the first half of the year from bad credit card loans, which will be amortized over the next five years at NT$130 million each month.

Last month, the bank posted NT$542.1 million in sales, a drop of 41.96 percent from a year earlier. For the first eight months of the year, its revenues amounted to NT$6.08 billion, down 21.81 percent from the same period of last year.

NEW CAPITALIZATION

In May, Fitch Ratings said the local lender would need a total of between NT$7 billion and NT$8 billion in new capitalization to improve its adjusted BIS ratio to 8 percent.

Market watchers have speculated that the bank is likely to try another fundraising plan by the end of the year to further improve its financial structure.

But Tu dismissed this speculation yesterday, saying: "This is it. We won't have another around of fundraising this year."