China Development Financial Holding Corp (CDFHC, 中華開發金控) yesterday said that it would continue to implement capital re-allocation to boost the company’s return on equity performance and to ensure sustainable growth, in an effort to counterbalance ongoing macroeconomic headwinds.
Following continued capital reductions and share repurchases of its subsidiaries, CDFHC is anticipating its cash position to be boosted by more than NT$20 billion (US$617.99 million) in capital surplus distributions, company officials told an investors’ conference.
The majority of the capital surplus would come from China Development Industrial Bank (CDIB, 中華開發工業銀行), which is to contribute NT$17.5 billion in gains derived from issuing common shares at a premium after gaining approval from its parent’s board of directors on Friday last week, CDFHC said.
The company’s brokerage unit, KGI Securities (凱基證券), is to reduce its capital by NT$3 billion, while China Development Asset Management Corp (中華開發資產管理公司) — a subsidiary of CDIB — is to cut its capital by NT$4 billion.
Backed by the additional cash, the company is to begin exploring appropriate mergers and acquisitions, CDFHC spokesman Eddy Chang (張立人) said.
The company said that it has continued to make progress in transitioning CDIB into a venture capital company with an emphasis on assessment management, shifting from low leverage direct investments to higher leverage commercial banking businesses.
Similarly, KGI Securities is aiming to evolve into a wealth management services provider, shifting focus from its brokerage business.
The firm said that KGI Bank, which was formerly known as Cosmos Bank (萬泰銀行) before it was acquired in 2014, has become its leading source of recurring income.
“Although our financial leverage has surged in the past few years following major acquisitions and restructuring, the figure is still markedly lower than our domestic peers,” China Development Financial president Paul Yang (楊文鈞) said.
In addition, to take advantage of Taiwan’s low interest rates, KGI Bank is to issue US$110 million in US dollar-denominated 30-year zero-coupon debentures.
The callable debentures are to carry an internal rate of return of 4.155 percent, with the funds raised to be used to fund business expansions and optimize asset and liability duration matching, and develop bond-related financial products.
Looking ahead, the company said that KGI Bank would focus on promoting cross-selling synergies for its clients this year and KGI Securities is to add Indonesia to its many footholds in Asia, which include Singapore, Hong Kong, Thailand and China.
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