China Development Financial Holding Corp (中華開發金控) aims to increase ratios of recurring income to at least 60 or 75 percent from 50 percent in the first half of the year, aided by the acquisition of Cosmos Bank (萬泰銀行), senior executives said yesterday.
“The acquisition of Cosmos Bank would help raise recurring income to 49 percent and we aim to grow its contribution to two-third or three-quarter levels in the medium term,” company president Paul Yang (楊文鈞) told an investors’ conference in Taipei.
The conglomerate has been seeking to cut dependence on investment banking and equity investments as demand for the former is declining and gains from the latter are unpredictable.
Rather, China Development Financial would place more emphasis on asset management, allowing the group to gain fund efficiency and earnings, Yang said.
INTEGRATION
Cosmos Bank will coexist with flagship unit China Development Industrial Bank (中華開發工銀) for the time being, because it would take some time to integrate the two lenders, China Development Financial executive vice president Eddie Wang (王幼章) said.
Cosmos Bank could double its client base by taking advantage of the group’s brokerage arm, KGI Securities Co (凱基證券), which is the second-largest in Taiwan by market share with 84 offices nationwide, Wang said.
The ongoing integration allows Cosmos Bank to court KGI clients, both corporate and individual, to increase its wealth management business, consistent with the conglomerate’s bid to grow assets under management, Wang said.
Currently known for unsecured lending, Cosmos Bank is to improve its asset quality and lift the contribution of net fee income, which generated 20.3 percent of the lender’s profit in the first quarter of this year, from 18.4 percent last year and 11.4 percent in 2008, company data showed.
LOOKING AHEAD
Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s, raised Cosmos Bank’s credit ratings by five notches after the lender joined China Development.
KGI Securities has urged the Financial Supervisory Commission to lower the capital adequacy requirement to 150 percent from 200 percent, so it can better grow into a regional champion, given its deepest exposure abroad compared with domestic peers.
KGI bought Singapore-based futures brokerage Ong First Tradition Pte Ltd last year and is awaiting regulatory approval to acquire Singapore’s AmFraser Securities Pte Ltd.
The brokerage plans to generate a double-digit percentage return on equity in three to five years, a goal that is difficult, but achievable with regulatory easing and business enhancement, KGI executives said.
Shares in China Development Financial ended down 1.83 percent at NT$9.66 yesterday, weaker than the TAIEX’s 0.15 percent rise after gaining 7.33 percent so far this year, Taiwan Stock Exchange data showed.
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