Taishin Financial Holding Co (台新金控) yesterday said it was willing to negotiate with the new government regarding a decade-long management rights dispute with state-run Chang Hwa Bank (CHB, 彰化銀行).
“We are open to negotiations, whether the new government decides to move forward with its original plans for promoting consolidation in the financial sector, or formulate an appropriate exit plan that does not harm the interests of our 20,000-strong shareholders,” Taishin Financial chief financial officer and spokesperson Welch Lin (林維俊) told an investors’ conference.
In 2005, Taishin Financial heeded the government’s call to accelerate consolidation in the financial sector and outbid six competitors to secure a 22.5 percent controlling stake in the then-ailing CHB in hopes of gaining synergy with the state-run bank, Lin said.
However, there had been little cooperation between the two companies as disputes with the Ministry of Finance, which holds a 15.27 percent stake in CHB, had limited Taishin Financial’s role in the management of the state-run bank.
Welch Lin said that the initiative was proposed by premier-designate Lin Chuan (林全), who was the minister of finance in 2005.
He said that at the end of 2004, CHB had non-performing assets totaling NT$69.2 billion (US$2.13 billion at current exchange rates) and a non-performing loan (NPL) ratio of 7.77 percent, but that under the leadership of Taishin Financial-appointed executives, the bank’s financial condition had improved markedly, with the NPL ratio improving to 1.79 percent at the end of 2007.
In its latest ruling last month, the Taipei District Court lent support to Taishin Financial’s claim for permanent majority control, but rejected its request for compensation and a board reshuffle.
Taishin Financial also announced plans to issue a sizable amount of preferred shares at a premium, pending approval at its annual shareholders’ meeting next month.
The planned issue would consist of 3.5 billion shares of class F preferred shares that are callable in seven years with dividend yield capped at 8 percent, and 4 billion shares of class G preferred stocks that are callable in 10 years with dividend yield capped at 7 percent.
Welch Lin said the move is aimed at raising funds to bolster the company’s financial condition and support its expansion plans for the next five years. He said it has no connection with its ongoing dispute with CHB.
Taishin Financial reported that first-quarter net profit fell 15 percent annually to NT$3.8 billion, dragged down by NT$500 million in additional provisions against exposure to yuan-linked target redemption forwards (TRF). Return on assets fell from 1.29 percent to 1.02 percent, and return on equity dropped from 16.93 percent to 13.2 percent.
Earnings per share during the period were NT$0.41.
The firm expects a 15 percent rise in lending to small-to-medium sized enterprises this year, as well as modest growth of more than 5 percent in its consumer and corporate banking and wealth management business, Taishin Financial president Joseph Jao (饒世湛) said.
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