After a tumultuous 2008, Cathay Financial Holding Co (國泰金控) may raise a maximum of NT$15 billion (US$434.9 million) in capital to fund underperforming subsidiaries if their financial conditions worsen, company executives told an investors’ conference yesterday.
That would drive up the company’s debt-to-equity ratio to about 30 percent from the current 18 percent, chief financial officer Grace Chen (陳晏如) said yesterday.
“The financial service group’s capital adequacy will be our top priority for this year,” she said, adding that the company hasn’t ruled out any options, such as issuing subordinated debt or preferred shares to raise the necessary funds.
The company boasted a strong 126 percent capital adequacy ratio for the parent group as of the end of last year, as well as a risk-based capital ratio of more than 250 percent and 360 percent for its life insurance and non-life insurance arms respectively.
It also showed a 11.03 percent bank of international settlement ratio for its banking subsidiary, after issuing NT$20 billion in seven-year subordinated debts.
But one analyst, who requested anonymity, yesterday expressed concern that the nation’s largest financial service provider may not be as well-capitalized as it claims.
“The company definitely needs another round of debt capital of between NT$20 billion and NT$30 billion to stay afloat,” he said. “Its outlook this year will remain gloomy.”
Although the company had written off NT$8.6 billion in loss-incurring collateralized debt obligations, potential losses may come from its remaining exposure of NT$20.2 billion, 47 percent of which is expected to mature within the next two years and may suffer a 30 percent loss, the analyst said.
Cathay Financial yesterday reported NT$2.2 billion in net profits for last year — a 93 percent year-on-year decline, with its earning per share dropping to NT$0.23 from NT$3.18 in 2007.
Its life insurance subsidiary, Cathay Life Insurance Co (國泰人壽), was pushed into the red with a record NT$2 billion net loss last year, while net income in its banking and non-life insurance arms suffered 30 percent and 50 percent year-on-year declines to NT$4.5 billion and NT$500 million respectively.
Net income in the first two months of this year, however, greatly improved to reach NT$4.1 billion, Chen said without elaborating.
To improve its investment returns, the company plans to increase its holdings in property and domestic equities.
Company president Hsiung Ming-ho (熊明河) said that the company plans to boost its property investments by another NT$91.8 billion to reach NT$213.47 billion, or 10 percent of its total investments.
Without offering specifics, he said that the company would also seek merger opportunities to expand.
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