Taishin Financial Holding Co (台新金控) yesterday said it plans to earn NT$1.6 billion (US$49.5 million) over the next five years from its banking unit’s earlier acquisition of Chinfon Commercial Bank’s (慶豐銀行) credit-card businesses with a book value of NT$4.24 billion for a price tag of NT$4.1 billion.
“Once these [690,000] new credit card clients are fully integrated [into Taishin International Bank (台新銀行)], the acquisition is expected to create a 2 percent to 3 percent normalized return on assets,” Spike Wu (吳清文), president of the company’s retail banking group, told an investor conference yesterday.
The company vowed to enhance the activation rate of Chinfon’s cardholders from its current 35 percent to 40 percent, while boosting their average monthly spending of NT$3,795 per card closes to Taishin’s average of NT$6,009 per card through intensive promotions, he said, adding that Chinfon’s cardholders are also expected to bring in better interest income from revolving credit loans.
Wu said that 72 percent of Chinfon’s credit cardholders from the deal haven’t banked with Taishin and will be regarded as a new source of banking customers for Taishin’s insurance or wealth management sales.
After the acquisition is completed in February, Taishin said it would leap to become the nation’s third-largest card issuer with nearly 3 million cardholders, 1.7 million of whom will be active users — the nation’s fourth-largest.
Recommending a “buy” rating, James Wu (吳永新) of BNP Paribas Securities (Asia) Ltd said in a note to clients last week that Taishin Financial’s business strategy is to regain its niche focus on consumer banking.
The analyst estimated Taishin Financial would benefit from the more than 50 percent fixed-rate time-deposit portion of its funding mix as the net interest margin (NIM) further expands in coming quarters.
Looking ahead, Taishin Financial said it plans to seek growth from both corporate and consumer lending as the economy improves, while enhancing fee incomes from its wealth management business. The company forecast its NIM would further climb this quarter from the previous quarter’s 1.33 percent after bottoming out at the second quarter’s 1.25 percent as its overall deposit rate had declined from 0.86 percent in September to 0.69 percent last month.
During the first nine months of this year, Taishin Financial reported a net loss of NT$749 million, or a loss of NT$0.2 per share, after setting aside NT$1.6 billion in provisions for its investments in loss-making convertible bonds and compensation for sales of structured notes linked to bankrupt Lehman Brothers.
Before the provisions, the company yesterday said its earning performance in the third quarter had rebounded to NT$2.4 billion in pre-tax earnings, 76 percent growth from the previous quarter, with a low bad-loan ratio of 0.94 percent and a high coverage ratio of 173 percent.
Company chief operating officer Greg Gibb yesterday added its high coverage ratio would prepare Taishin Financial for possible negative impacts from the planned implementation of Financial Accounting Standards No. 34 in 2011.
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