Taishin Financial Holding Co (台新金控) yesterday said it would uphold the interests of its 200,000 shareholders ahead of an upcoming court decision to be announced on Wednesday next week on its decade-long dispute over the managing rights of Chang Hwa Commercial Bank (CHB, 彰化銀行).
“Since December last year, when the Ministry of Finance usurped CHB management rights from Taishin Financial, our share price has dropped 14.7 percent, while domestic financial sector stocks have only slid by 4.5 percent,” Taishin Financial’s chief financial officer Welch Lin (林維俊) said.
The circumstances that led to Taishin Financial shares slumping more than 10 percent against its peers is irreconcilable, but the company still has faith in the nation’s judicial system, he said.
Taishin Financial said there is no urgency to raise capital as it will use its own funds to redeem the NT$14 billion (US$424.5 million) preferred shares set to expire in the first quarter of next year.
Lin said that it would be imprudent to issue common shares to raise the funds, as the move would further harm shareholders who had already suffered injustice.
“We are still standing by our proposal to the Financial Supervisory Commission’s Banking Bureau that the preferred shares be redeemed in yearly installments,” Lin said.
In the first three quarters of the year, Taishin Financial’s net income declined 12.8 percent annually to NT$11.6 billion, or NT$1.23 per share, due to the government’s decision to hike the business tax on financial services from 3 percent to 5 percent.
This quarter, the company is expecting steady earnings growth of no more than 5 percent.
The bank-focused conglomerate saw its loans and deposits increase by 9.2 percent and 12.3 percent respectively from a year earlier in the first three quarters, while net interest and fees income grew by 12.8 percent and 8.5 percent respectively.
However, its investment returns tumbled over the nine-month period and its treasury marketing unit businesses contracted after regulators cracked down on yuan-linked target redemption forwards.
As the company had issued NT$20 billion worth of corporate bonds this year, annual interest expense — estimated at about 2 percent, or NT$400 million a year, is expected to continue to drag down earnings, Taishin Financial said.
As a result, net interest margin — a critical gauge of lenders’ profitability — tumbled from 1.51 percent in the second quarter to 1.49 percent in the third quarter, the company added.
However, the company said its capital adequacy ratio of 128.3 percent is sufficient and that the figure appears low due to the way risks associated with home loans are calculated in Taiwan.
“Under the internal ratings-based approach, our tier-1 capital ratio is standing at a robust 11 percent,” Lin said.
“Our asset quality remains stellar, and we have no plans to raise our capital adequacy ratios much further than what is required by regulators,” he said.
Commenting on Taishin Financial's third-quarter results, CIMB Securities Ltd said the company's earnings momentum has been "tapering off" since the second quarter, mainly because of slowing growth in wealth management fees and substantially reduced income of investment and related trading business.
The brokerage said Taishin Financial faces a "medicore earnings outlook" but the good news is that there's no urgency to raise capital.
This story has been updated since it was first published.
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