Deputy Minister of Finance Wu Tang-chieh (吳當傑), who is acting chairman of the state-owned Land Bank of Taiwan (土地銀行), yesterday said the lender would press ahead with plans to raise new funds through an initial public offering (IPO).
Wu took up the position yesterday from Shiu Kuang-si (徐光曦), who was appointed to the helm of state-run Hua Nan Financial Holding Co (華南金控) after former chairman Liu Teng-cheng (劉燈城) retired upon turning 65 years old.
Land Bank employees staged a demonstration before the swearing-in ceremony to protest the IPO plan, saying that they feared it might lead to the mortgage-focused lender’s privatization and dilute their benefits.
“We once thought of scrapping the IPO plan and making national enterprises subscribe to new shares to boost Land Bank’s capital strength,” Wu told reporters.
However, national enterprises shied from the investment proposal amid concerns about a lack of professional knowledge and experience in operating banks, he said.
Land Bank aims to raise NT$30 billion (US$914.6 million) in new capital to elevate its Tier 1 capital ratio from 6.84 percent to 8.5 percent, which would allow it to expand business at home and overseas.
CAPITAL
Tier 1 capital, which consists primarily of common stock and retained earnings, is the core measure of a bank’s financial health from a regulator’s point of view.
The lender plans to raise about NT$5 billion through the open market and put aside another 10 percent for subscriptions by employees, and auction off the remainder, Wu said.
Proposed as part of the government’s budget for next year, the IPO plan still needs approval from the legislature.
Capital inadequacy has disqualified Land Bank from filling overseas expansion plans with the Financial Supervisory Commission, Wu said.
The capital increase scheme is unlikely to affect existing employee compensations or benefits, as the Ministry of Finance is to continue to be the largest shareholder with an 80 percent stake, he said.
While being the nation’s largest lender in terms of real-estate-linked financing, the bank should seek to diversify its sources of income by growing fee and wealth management incomes, he added.
Minister of Finance Chang Sheng-ford (張盛和) said that Land Bank of Taiwan should improve its capital sufficiency and asset quality so it can lend substantial support to the government in coping with the nation’s rapidly aging population and industrial reform.
As deputy finance minister, Wu helped the government win a majority control in the boardroom of Chang Hwa Commercial Bank (彰化銀行) and gain a majority of shares in Taipei 101 Taipei Financial Center Corp (台北金融大樓公司), operator of the Taipei 101 skyscraper.
As of July, Land Bank reported NT$6.5 billion in net income, translating into earnings of NT$1.3 per share and more than meeting the budget target, company data showed. The profit figure might rise to NT$13 billion for the year, officials said.
Meanwhile, Shiu said Hua Nan Financial would strive to develop into a major regional player under his leadership and that the main subsidiary Hua Nan Commercial Bank (華南銀行) would grow its loan books by 3 percent this year, or 1.5 times of the nation’s projected GDP growth.
Shiu encouraged his employees to stay hungry for professional knowledge and product innovation, saying being good is not enough to meet growing competition locally or on the international stage.
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