State-owned Land Bank of Taiwan (土地銀行) aims to raise new funds through an initial public offering (IPO) in three years to strengthen its capital adequacy ratio, which lags behind peers, newly sworn-in chairman Shiu Kuang-si (徐光曦) said yesterday.
The nation’s largest lender in terms of real estate-linked financing also plans to diversify its sources of income by increasing operations overseas to pursue a higher profit margin, said Shiu, who assumed his post yesterday morning.
“It is urgent that Land Bank increase its capital of only NT$50 billion [US$1.67 billion], compared with the NT$70 billion to NT$80 billion of its peers,” Shiu said.
The bank plans to issue new shares at a price of NT$20 billion through an IPO, which could bring in NT$40 billion, given the bank’s net worth of NT$23.32 per share, Shiu said.
The 100 percent state-owned bank needs approval from the Ministry of Finance before carrying out the IPO, which is likely to be proposed in the budget for 2016, Shiu said.
The lender has yet to decide whether to raise funds equal to a 30 percent stake on the open market or from a strategic partner, Shiu said.
The cash injection would elevate the lender’s Tier 1 capital ratio from the current 6.84 percent to 8.5 percent, allowing Land Bank more room to expand businesses at home and abroad, Shiu said.
Tier 1 capital, which consists primarily of common stock and retained earnings, is the core measure of a bank’s financial strength from a regulator’s point of view.
Land Bank will consult an underwriter before setting the IPO price, Shiu said.
“Ranking 284th in terms of profitability in the survey of 1,000 banks in the world, Land Bank should take quick steps to boost its earnings ability,” he said.
The lender posted NT$6.21 billion in pretax income for the first six months of the year, an increase of only 0.5 percent from the same period last year, according to the Financial Supervisory Commission’s Web site.
Shiu, 63, previously served as president at Mega Financial Holding Co (兆豐金) and has held various positions at the finance ministry.
He said he will push the bank to increase its overseas exposure, as the overcrowded and fragmented domestic market constrains profit margins.
The lender has branches in Hong Kong, Singapore, New York, Los Angeles, Shanghai and Tianjin.
Land Bank is set to expand operations in China, offshore banking and other businesses, Shiu said.
The lender also needs to chart out a new core business, with real estate-linked lending accounting for 52 percent of the loan books, he said, adding that he needed more time to weigh the bank’s future development.
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