State-run Taiwan Cooperative Financial Holding Co (合庫金控) yesterday said it has reached a deal with BNP Paribas Investment Partners to buy back the shares it does not own in a joint asset management venture.
The plan, which still needs to be approved by the Financial Supervisory Commission, would allow Taiwan Cooperative Financial full control of the BNP Paribas TCB Asset Management Co (合庫巴黎證券投資信託). The asset management firm has been a drag on the bank-focused conglomerate’s profitability since its creation in June 2011.
“The two sides decided to separate due to business strategy differences,” Taiwan Cooperative Financial chairman Leon Shen (沈臨龍) told reporters.
Taiwan Cooperative holds 51 percent of the shares, while the French company owns the rest.
BNP Paribas TCB Asset Management incurred losses of NT$9.3 million (US$30,737) last year, up from losses of NT$8.8 million in 2012.
The parting of ways will not affect another joint venture, BNP Paribas Assurance TCB Life Insurance Co (合作金庫人壽), Shen said.
The insurance company made NT$239 million in profits for the first time last year, he said.
Taiwan Cooperative Financial president Yu Chin-tang (尤錦堂) said the asset management arm will be renamed after the share transfer is completed, which will likely be in the first half of this year.
The exit of French executives from the unit will help lower personnel costs, Yu said. He refused to comment on the exact costs involved, but sources with knowledge of the matter said it took more than NT$100 million.
The asset management firm has a net worth of NT$387 million.
“We expect the unit to turn a profit starting in 2016, after management reshuffles and ties are strengthened with Taiwan Cooperative Financial and its subsidiaries,” Yu said.
Taiwan Cooperative Financial, the fourth-largest financial group in the nation by assets, faces tough pressure to turn a profit this year after posting NT$8.4 billion in net profit last year, Taiwan Cooperative Bank (合庫銀行) president Lin Hong-chen (林鴻琛) said.
He attributed the challenges to provision costs sized at NT$5 billion to meet the tighter statutory requirement by the end of the year.
Taiwan Cooperative Bank plans to fund the costs by selling real estate properties and adjusting its loan structure to raise interest spread to 1.37 percent this year, up 10 basis points from 1.27 percent last month, Lin said.
The bank, the nation’s second-largest mortgage operator, intends to keep home loans flat this year from last year at NT$480 billion, in line with government policies aimed at cooling the housing market, Lin said.
The bank may emerge unharmed from the plunge in housing prices of up to 45 percent given its average loan to value ratios stands at 56 percent, Lin said.
Shares in Taiwan Cooperative Financial ended flat at NT$16.35 in Taipei trading yesterday, weaker than the TAIEX’s 0.45 percent gain, Taiwan Stock Exchange data showed.