Cosmos Bank Taiwan (
The bank made the announcement after its board approved the capitalization plan earlier yesterday to strengthen its asset quality, that had been damaged by unsecured consumer lending.
Cosmos' capitalization weakened drastically last year following an unexpected surge in credit costs. The bank posted losses of NT$11.28 billion last year after it allotted NT$9.6 billion for provisioning costs to cover the mounting bad consumer loans.
The latest government data showed that Cosmos' net value reached NT$11.9 billion, or NT$6 per share, with a non-performing ratio of 5.2 percent. In comparison, Cosmos generated NT$920 million in pre-tax income in 2005. The bank had hoped that the fresh capital would lower the bad loan ratio and boost its capital adequacy ratio to meet regulatory requirements.
Capital adequacy ratio, also known as the BIS ratio, is a measure of a bank's financial strength. As of the end of last year, Cosmos reported a capital adequacy ratio of 9.39 percent and a 100 percent coverage ratio, which gauges the sufficiency of institutional reserves covering bad debt, government figures show.
Following the recapitalization, the bank will have paid-in capital amounting to NT$35 billion, with a BIS ratio of 12 percent, Cnyes.com reported, citing the bank's president Hu Chien-chu (
News Web site ettoday.com carried a similar report last night. It said that Cosmos would raise the funds at NT$14 per share, citing spokesman and vice president Shih Kung-liang (
Cosmos has hired Morgan Stanley to find potential investors who are interested in acquiring the new shares through private placement.
The bank will provide more details about the share sale at its shareholder meeting on May 30, ettoday.com quoted Shih as saying.
GE Consumer Finance, which bought a 10 percent stake in Cosmos last year, would see its stake increase to 24.9 percent in 2010 to help Cosmos improve its financial structure, Cosmos said earlier last year.
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