State-run First Financial Holding Co (第一金控) is considering acquiring a stake in a Chinese peer and setting up a second branch in China to strengthen its presence in the massive market, company executives said yesterday.
The statement came after Hua Nan Commercial Bank (華南銀行), the banking arm of Hua Nan Financial Holding Co (華南金控), on Monday signed a cooperation pact with China’s Fujian Haixia Bank (福建海峽銀行) in the hope of becoming strategic partners.
“We’re studying the possibility of taking up a 20 percent stake in a Chinese lender as part of the group’s plan to expand in China,” Lin Hann-chi (林漢奇), executive vice president of First Commercial Bank (第一銀行), the banking subsidiary of First Financial, said yesterday.
Like Hua Nan Bank, First Bank is targeting city-level banks in which Taiwanese lenders may own significant shares because of their modest scale and capital, Lin said, without naming which Chinese bank it was targeting.
Under current rules, domestic banks may expand in China via two of three channels — setting up branches or subsidiaries, or owning up to 20 percent of the shares in their Chinese counterparts. The Financial Supervisory Commission is considering easing restrictions to help them compete against foreign rivals in China.
Lin said First Bank plans to open a second branch in China, likely in northeastern or midwestern China.
The first bank’s Chinese branch, in Shanghai, reported a net income of US$293,000 last month and is on track to turning a profit this year, so it may qualify to apply to operate Chinese yuan businesses next year, he said.
Partly to fund its overseas expansion, First Financial recently announced a plan to issue 800 million new common shares in the hope of raising NT$16 billion (US$553 million) in fresh capital, First Financial executive vice president Hung Hsin-shih (洪新湜) said.
The group expects to price the new shares in July and finish raising funds in September after obtaining regulatory approval late next month, Hung said.
The fresh capital will also be used to lift the group’s core capital ratio to more than 8 percent as required by new international accounting rules, from the present 7.03 percent, Hung said.
“The group will have no need for new capital for the coming two years,” she said.
First Financial expects profitability to accelerate for the rest of the year after cumulative net income jumped 62.49 percent yearly to NT$2.75 billion in the first four months, both Lin and Hung said. The figures translated into earnings of NT$0.43 per share as of last month.
The loan demand remains solid and the interest margin is likely to trend upward, boosting fee and interest incomes, Lin said.
Net interest margin averaged 1.07 percent in the first quarter and may edge up to between 1.12 percent and 1.15 percent toward the end of the year if the central bank hikes interest rates by 12.5 basis points each quarter, Lin said.