China Development Financial Holding Co (中華開發金控) aims to turn newly acquired Cosmos Bank (萬泰銀行) into a merchant bank focused mainly on small and medium-size corporate banking, cross-border trade financing and treasury business, senior executives said yesterday.
The acquisition, which still needs approval from the Financial Supervisory Commission, would allow the conglomerate to create a niche market for its subsidiary just like JPMorgan Chase & Co of the US, president Paul Yang (楊文鈞) said.
The group’s assets may grow to more than NT$800 billion (US$26.49 billion) when the integration — set for July — occurs, or 4.8 times its net worth from 3.8 times last year, making it the main source of income with a 40 percent contribution to overall earnings, Yang said.
Incumbent banking arm, China Development Industrial Bank (中華開發工銀), would then cease to exist. Falling demand for venture capital in recent years has hindered its development.
Cosmos Bank is set to significantly advance the conglomerate’s attempts to boost recurrent income, fund utilization and yield rates, Yang said, as the present business model leaves the company’s finances too closely linked to bourses across the world.
“Based on its performance last year, it would have raised the ratio of regular income to 45 percent of the group’s total earnings,” Yang said.
Cosmos Bank could also help China Development to add customers and strengthen cross-selling efficiency, he said.
KGI Securities Co (凱基證券), the group’s securities subsidiary, plans to shift 50 percent of its customers to Cosmos Bank, thereby lifting demand deposits from 26 percent to 44 percent of overall deposits and lowering funding costs, Yang said.
The new subsidiary is to issue credit cards and provide wealth management products to customers currently at other units to expand fee and interest income, he said.
KGI Securities is also looking to deepen its presence at home and in the region, taking advantage of loosened regulations to strengthen its offshore securities units, Yang said.
Offshore operations could help facilitate fund repatriations as different surveys show many Taiwanese wire overseas funds back home when such channels exit, he said.
China Development shares closed down 0.34 percent at NT$8.74 yesterday, weaker than TAIEX’s 0.08 percent gain, Taiwan Stock Exchange data showed.