The Industrial Bank of Taiwan (
The NT$3.59 billion collateralized loan obligation, a bond backed by 41 corporate credits, follows the introduction of regulations in the middle of last year allowing the securitization of financial assets. Rivals of the nation's second-largest non-commercial lender plan to follow suit.
Asset-backed securities allow lenders to move assets from their books, freeing capital they would otherwise set aside against the risk of loans souring.
Selling asset-backed securities "will allow banks to improve their capital-adequacy ratios," said Jesse Wang, a bank analyst at ABN Amro Holding NV in Taiwan.
The average capital adequacy ratio stood at 10.2 percent as of June last year, according to the central bank.
"That's unadjusted for disposal of non-performing loans," Wang said.
"Recognition of the loan losses will bring the overall industry ratio to below 8 percent," which is the minimum set by the Bank for International Settlements, she said.
Societe Generale advised Industrial Bank on the structure of the sale. The bonds were split into two lots -- a so-called senior portion, making up almost four-fifths of the total, paying a coupon of 2.8 percent and rated twA by Standard & Poor's unit Taiwan Ratings Corp (
Full repayment is expected to be completed in three years and seven months.
Industrial Bank took up the remaining so-called junior portion, which absorbs the first losses from any defaults on the underlying loans.
"The risks are diversified as each loan does not exceed NT$100 million, so, even if a default occurs, it's in control," said Mark Hu, a fixed-income dealer who evaluated the sale at the treasury department of United World Chinese Commercial Bank (世華銀行), one of the investors.
Banks are counting on demand for assets paying yields higher than government bonds or fixed deposits.
"Some of our money is in deposits, where the interest rate is quite low. So, taking some of that out to buy asset-backed securities will help increase returns," said Kenny Kwang, who helps manage the NT$60.3 billion of equities and fixed-income assets at MassMutual Mercuries Life Insurance Co.
First Commercial Bank (
Passage of the Financial Asset Securitization Law (
The Ministry of Finance approved the Industrial Bank sale last month.
"Banks' initial sales will be backed by higher-quality assets, giving investors a stronger protection," said Chang Yi-hsiung (張義雄), First Commercial's executive vice president.
Chinatrust Commercial expects to be able to complete a sale of NT$5 billion of debt backed by home loans within a couple of months after asking for approval from the regulator as early as next month, said Huang Szu-kuo (
Taishin International also plans to sell NT$5 billion of bonds backed by mortgages by June, said Sarita Hao (
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure
RSS