China Development Financial Holding Corp (CDFHC, 中華開發金控) plans to continue capital restructuring efforts at its two banking subsidiaries, top executives said yesterday.
The company’s main subsidiary, China Development Industrial Bank (中華開發工業銀行), which used to focus on industrial banking, in May transferred most of its businesses — including corporate banking and treasury marketing units (TMUs) — to KGI Bank (凱基銀行).
At the end of June, capital re-allocation in the financial group was changed to a more even 30 percent, 34 percent and 36 percent split for China Development Industrial Bank, KGI Securities Co (凱基證券) and KGI Bank respectively.
KGI Bank, which was known as Cosmos Bank (萬泰銀行) before it was bought by China Development Financial in September last year, contributed NT$3.008 billion (US$91.33 million) in net income to the holding company in the first half of the year.
China Development Financial’s aggregate net income in the first half of the year grew 5.6 percent year-on-year to NT$5.092 billion, the company said.
Earnings by brokerage arm KGI Securities grew 53 percent year-on-year, while China Development Industrial Bank’s earnings plunged 66.5 percent year-on-year to NT$914 million from NT$2.728 billion a year earlier due to fewer divestments made by its operations in China, company spokesman Eddy Chang (張立人) said.
“At 5.5 times, our leverage is still much lower than the average 14.5 times among local financial holding companies,” Chang said.
China Development Industrial Bank divided its principal investment unit into two groups focusing on venture capital and private equity businesses as the bank continues to move toward the role of managing domestic and international external funds overseen by its parent company, China Development Industrial Bank executive vice president Kathy Yang (楊鎧蟬) said.
It now manages NT$27 billion in funds based in Taiwan, China and other overseas markets through its CDIB Capital Asia Partners Fund, which has a scale of about US$4 million, Yang said.
“We will continue to revitalize our previous direct investments and assets. As of the end of the first six months of this year, we have recovered NT$6.4 billion in cash proceeds,” he said.
Deregulatory measures that have expanded the investment cap in foreign currency bonds imposed on local insurance companies has led to rapid growth in international bond issuance business, KGI Securities president Albert Ding (丁紹曾) said.
In the first half of the year, underwriting of international bonds reached NT$106.3 billion, nearing the NT$111.3 billion the company made last year, Ding said.
Total issuance of international bonds has exceeded NT$600 billion in the same period, propelled by strong demand from local life insurers, he said.
In a bid to stave off competitors in China, KGI Securities is planning to list KGI Hong Kong on the Hong Kong bourse, Ding said.
The listing would also include the brokerage’s affiliates based in Thailand and Singapore, he said.
“Our previous direct investment business model was not ideal, as regulations prevented booking of unrealized gains, but required provisions against unrealized losses,” China Development Financial president Paul Yang (楊文鈞) said.
“It takes time to turn capital into fix income generating assets,” he said.
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