SinoPac Financial Holdings Co (永豐金控) will book an additional US$44.66 million in provisions to write off its banking unit’s losses related to structured note products sold by the Private Equity Management Group (PEM Group), which was seized by the US government in April.
In a stock exchange filing on Friday, SinoPac Financial said its board agreed to use the additional provisions to cover losses it could incur from the buyback of PEM Group products that Bank SinoPac (永豐銀行) has sold to customers.
SinoPac Financial said the amount was calculated based on the estimated asset value provided by a US court-appointed receiver in charge of late Taiwanese-American financier Danny Pang’s (彭日成) companies.
Pang, 42, died on Sept. 12 in California. Before his death, he was under investigation over allegations he had cheated investors via a Ponzi scheme.
ENSNARED
Bank SinoPac is among six local banks that marketed more than US$700 million in PEM Group products to 16,000 Taiwanese investors in the past few years, Financial Supervisory Commission Chairman Sean Chen (陳冲) said on April 29.
Other banks are Cosmos Bank (萬泰銀行), EnTie Commercial Bank (安泰銀行), Hua Nan Commercial Bank (華南銀行), Standard Chartered Bank (Taiwan) Ltd (渣打銀行) and Taichung Commercial Bank (台中商銀).
Bank SinoPac sold three types of PEM Group products to its customers for a total of US$146 million.
On June 26, the bank’s board agreed to buy back PEM Group products from customers before reaching their maturities and tentatively decided to exercise US$23 million as writeoffs.
Including the newly added US$44.66 million in provisions, Bank SinoPac has so far booked US$67.66 million in PEM Group writeoffs this year, or 46.3 percent of its total exposure.
As Bank SinoPac represents a core unit of the SinoPac Financial, accounting for about 70 percent of the group’s total recurring profits, the increased PEM Group writeoffs are expected to hurt the financial services provider’s whole-year profitability.
UNCERTAINTY
With uncertainties over SinoPac group’s profitability, the three major international ratings agencies — Standard & Poor’s, Moody’s and Fitch Ratings — in June and July gave a negative outlook for SinoPac Financial and Bank SinoPac’s credit ratings.
Last month, SinoPac Financial reported NT$1.15 billion (US$35.65 million) in net profit, or NT$0.17 earnings per share. Between January and last month, it posted NT$2.47 billion in net profit, or NT$0.35 per share.
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