Shin Kong posts NT$2.85 billion loss

Shin Kong Financial Holding Co (新光金控) announced on Tuesday it would see asset impairments on investments in Cosmos Bank (萬泰銀行) and in collateralized bond obligations (CBOs) linked to US mortgage products, making it the only financial holding firm to report a net loss last month.

Shin Kong Financial, the nation's eighth-largest financial service provider by assets, posted NT$2.85 billion (US$87.5 million) in losses last month, or NT$0.57 per share, after its two units wrote off NT$5.04 billion in Cosmos debt holdings and in the CBOs issued by E.Sun Bank (玉山銀行), according to filings sent to the Taiwan Stock Exchange on Tuesday night.

Following the write-off, the company posted a NT$7.28 billion net profit in the first nine months of the year, or NT$1.48 per share. The company posted a net profit of NT$10.1 billion in the first eight months and NT$8.79 billion in the first nine months of last year.

Shares of Shin Kong Financial dropped NT$0.1, or 0.31 percent, to close at NT$31.8 on Tuesday. The local financial markets were closed yesterday for the Double Ten National Day.

Shin Kong's share price has declined 25.9 percent from this year's high of NT$42.9 on July 24. It has fallen 9.5 percent since the beginning of the year, the stock exchange's statistics showed.

In its filing to the stock exchange, Shin Kong Financial said its life insurance unit, Shin Kong Life Insurance Co (新光人壽), booked a loss of NT$1.03 billion on NT$2.49 billion in CBOs issued by E.Sun Bank.

The insurer said it expected the CBOs, though not directly linked to US subprime mortgages, to see a recovery by the end of the year as the US credit crunch stablizes.

Shin Kong Financial isn't the only financial holding firm to report losses on structured securities investment as a result of the US credit problem.

Fubon Financial Holding Co (富邦金控), the nation's second-largest financial services company by market value, on Tuesday also reported a loss of NT$2.5 billion in CBO investment last month.

Shin Kong Financial's decision to write off its investment loss in cash-strapped Cosmos, the nation's largest cash card issuer, was the main reason for the contraction in its nine-month profit figure from the first eight months of the year and the decline year-on-year.

The company's banking unit, Shin Kong Bank (新光銀行), approved a write-off of NT$1.81 billion in losses when it converted its debt holdings in Cosmos into equities. Shin Kong Bank owns NT$3.125 billion in convertible bonds issued last year by Cosmos.

Shin Kong Bank first signed a memorandum of understanding with Cosmos on Sept. 7 over the debt-to-equity conversion scheme as part of Cosmos' plans to improve its financial structure.

Shin Kong Life Insurance, meanwhile, also agreed on Tuesday to write off NT$406 million when converting NT$700 million in subordinate debts in Cosmos into NT$232 million in common shares. It also reported an impairment loss of NT$1.79 billion on 106.3 million shares it owns in Cosmos, it said.