Taishin International Bank (台新銀行) yesterday said it plans to raise NT$6 billion (US$195.82 million) from its parent company in September to shore up operational funding.
The move to raise fresh funds comes as a significant amount of the bank’s capital is now tied up in its holdings of Chang Hwa Commercial Bank (CHB, 彰化銀行) amid a legal battle between subsidiary Taishin Financial Holding Co (台新金控) and the Ministry of Finance over majority control of CHB.
Taishin Financial filed a lawsuit against the Ministry of Finance in December last year, accusing the ministry of breaking a commitment between the two sides reached a decade ago and manipulating CHB’s board election earlier last year.
The lawsuit has left Taishin Financial, which holds a 22.5 percent stake in CHB, with a large amount of inaccessible capital and the need to recognize a one-time asset loss of NT$14.78 billion in the fourth quarter last year after failing to obtain a controlling majority of seats on the CHB board.
“We hope the ministry will follow the contract and fulfill its promise to Taishin Financial and that the issue will be resolved as soon as possible,” chief financial officer Welch Lin (林維俊) told reporters after a quarterly investors’ conference.
The financial holding company said it is ready to undertake the new NT$6 billion round of fund-raising later this year to help its banking subsidiary enhance its double leverage ratio to a healthier level, Lin added.
In the meantime, Taishin Financial said it has two suggestions for the ministry, in the hopes of solving the CHB issue. The first is that the ministry keeps its promise to Taishin Financial to encourage the merger between Taishin Bank and CHB, while the second is the introduction of a fair mechanism for Taishin Financial’s exit from CHB investments.
Taishin Financial is willing to invest more in the merged bank, Lin said. However, if the ministry changes its mind, it should pay back the capital Taishin Financial previously invested in CHB, which would significantly enhance Taishin Bank’s bottom line and boost its return on equity, Lin added.
Lin reiterated that Taishin Financial would not dispose of its 22.5 percent stake in CHB before the lawsuit is resolved.
In the first quarter of this year, Taishin Financial’s net profit fell 10.8 percent from the same period last year to NT$4.55 billion, with earnings per share of NT$0.49, the company said in a statement.
Lin attributed the year-on-year decline in profitability to lower contributions by Taishin Bank’s treasury marketing unit, which mainly sells foreign currency-denominated products.
However, net income made by the bank’s offshore banking units and overseas business accounted for more than 40 percent of the company’s total profit in the first quarter, the highest level in the company’s history.
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