New shareholder threatens O-Bank’s integration plans

DREAMS QUASHED::The bank’s chairman said that Pau Jar Group’s new 17% stake in its affiliate China Bills also raised the spectre of Pau Jar swapping stock for shares in the bank

By Crystal Hsu  /  Staff reporter

Fri, Apr 06, 2018 - Page 12

O-Bank Co Ltd (王道商業銀行), the nation’s first digital bank, has halted plans to expand into a financial holding company after a local developer acquired a majority stake in an affiliated billing company.

The lender, formerly known as the Industrial Bank of Taiwan (台灣工業銀行), was transformed into a commercial bank in January last year and was advised by financial regulators to expand into a financial holding company.

“We have decided to put off the expansion plan after Pau Jar Group (寶佳機構) acquired a 17 percent stake in affiliate China Bills Finance Corp (中華票券),” O-Bank chairman Kenneth Lo (駱錦明) told a news conference on Monday.

O-Bank is the main unit of O-Bank Group (王道銀行集團), whose business interests also include IBT Leasing Co (台駿國際租賃) and EverTrust Bank (美國華信商業銀行), allowing it to grow into a financial conglomerate.

With its sizeable stake, Pau Jar would like to have a say on China Bills’ management and development plans, Lo said, adding that the New Taipei City-based developer would not agree to a merger without financial incentives.

Pau Jar is likely to suggest a share-swap scheme for the integration, which would give it a majority stake in O-Bank as well, Lo said.

He said he welcomed Pau Jar playing a role in the management of China Bills, but would frown on plans to take over O-Bank through a share-swap deal.

A share in China Bills would trade for up to two shares in O-Bank based on their respective market values.

Shares in China Bills on Tuesday closed down 0.67 percent in Taipei trading at NT$14.75 while O-Bank shares gained 0.34 percent to close at NT$8.74.

“That would be unfair to O-Bank, as its price-to-book ratio currently stands at 0.72, much lower than 1.6 to 2 for financial firms abroad,” Lo said.

Financial share prices are low in Taiwan because foreign institutional players favor big technology plays, analysts said.

Pau Jar is unlikely to offload its stake in China Bills anytime soon given the price it paid to acquire the shares, Lo said, adding that he knew the figure.

The backdrop renders an integration unlikely, if not impossible, he said.

China Bills generated NT$1.35 billion (US$46.32 million) in net income last year, more than O-Bank’s NT$1.07 billion, company data showed.