SinoPac Financial reveals US$6m in impaired assets

SinoPac Financial Holdings Co (永豐金控) said yesterday it had US$6 million in impaired assets among its US$350 million investments in structured-investment vehicles (SIVs) as of last month following the fallout from the US subprime mortgage crisis.

But SinoPac, the nation's ninth-largest financial holding group by assets, said the assets in its investment portfolio of SIVs are highly rated structured debts.

"We are actively monitoring the future development on the SIV front," SinoPac spokesman Richard Chang (張立荃) told the Taipei Times in a telephone interview.

SIVs are investment funds set up to buy assets like mortgage-backed bonds and other securities from banks. These vehicles usually finance their purchases by issuing short-term debt.

Chang did not reveal losses in relation to the SIV investment after losses on SIVs recently renewed market concerns that the US credit problem will continue expanding.

"We will report losses and write-down [figures] as necessary in line with accounting standards," Chang said. The company is expected to report the loss and write-down figures in two to three weeks at the earliest, he added.

Early yesterday, SinoPac said in a filing to the Taiwan Stock Exchange that around 40 percent to 50 percent of its SIV assets were financial bonds rated AA and the others were asset-backed securities rated AAA.

"Basically, [our] SIV assets are not linked to the US subprime mortgage products," the filing said.

Citigroup said in a report dated Oct. 16 that SinoPac's exposure to collateralized debt obligations (CDOs), collateralized bond obligations (CBOs) and SIVs would reach US$360 million, of which US$10 million is related to US subprime loans.

Shares of SinoPac dropped NT$0.15, or 1.02 percent, to close at NT$14.60 on the Taiwan Stock Exchange, underperforming a 0.63-percent decline in the benchmark TAIEX.

Taiwan Ratings Corp (中華信評) yesterday said ratings on SinoPac Financial and its banking unit, Bank SinoPac (永豐銀行), would not be immediately affected by the SIV loss.

But Eunice Fan (范維華), an analyst at Taiwan Ratings, said the agency would continue to monitor developments.

"We will reassess SinoPac's ratings if the potential loss becomes larger and it has an impact on the financial group's capitalization," she said by phone.

Taiwan Ratings said the asset impairment at SinoPac's SIV assets was primarily due to market value depreciation along with global capital market fluctuations. But the impact is rather limited, Fan said.

"The losses only translated into 0.2 percent of the [SinoPac] bank's adjusted total equity or 0.1 percent of SinoPac Financial's adjusted total equity at the same date," she said.

SinoPac stock has dropped 2.02 percent since Oct. 18 after a local newspaper, comparing the company with other domestic financial holding groups, said it would be most negatively affected by the problematic structured debts linked to US home loans.

The Chinese-language Apple Daily reported that day that the total exposure of SinoPac's SIVs would be NT$11.4 billion (US$350 million) and the company might have to write down NT$2.1 billion in losses, citing Sherry Lin (林淑娥), an analyst who tracks the financial sector at Credit Suisse First Boston. Total SIV exposure by Taiwanese banks should be NT$15.6 billion, the newspaper, said citing Lin.