The board of Cosmos Bank (萬泰銀行) has approved plans to slash the lender’s capital and then raise fresh funds via private placements to replenish capital eroded by losses.
The board of directors held a meeting late on Wednesday, in which they agreed to reduce Cosmos’ capital by 46.54 percent, or NT$13.28 billion (US$451.9 million), a statement from the bank said.
After the share reduction plan, the bank’s total paid-in capital will be NT$15.26 billion, it said.
The capital reduction move comes before the bank’s scheduled conversion of its subordinated unsecured mandatory convertible bonds (MCB) due on Dec. 27, which is expected to increase Cosmos’ share capital to NT$28 billion and dilute the company’s earnings per share.
On Wednesday the board also approved a rights issuance of 100 million shares through private placements. The bank plans to use the proceeds to strengthen its working capital, maintain higher earnings per share and boost its capital adequacy ratio, the statement said.
The bank plans to issue NT$1 billion in new shares, with potential buyers including SAC PEI Taiwan Holdings BV and China Development Industrial Bank (中華開發工銀).
Cosmos did not specify the date of the planned rights issuance, but the Chinese-language United Evening News reported yesterday that the firm plans to issue new shares in March next year at the earliest, citing company sources.
Cosmos is the only Taiwanese lender with a non-performing loan (NPL) ratio above the 2 percent threshold as of August (6.82 percent compared with the average 0.54 percent for the sector) while its coverage ratio — loans covered by banks’ provisions and a gauge indicating the sufficiency of bad loan reserves — was 42.44, compared with the 201.8 percent average for the sector, the Financial Supervisory Commission (FSC) said in a report released yesterday.
However, the recovery of bad debt from the sale of a Prince Motors Corp's (太子汽車) office building in downtown Taipei on Sept. 27 is likely to provide the bank with an substantial one-off income and help reduce its NPL ratio to as low as 0.87 percent as of the end of last month, according to analysts.
The bank’s business profile has been largely concentrated in the cash-card business after it launched the nation’s first cash-advance cards in 1999. However, Cosmos saw its capitalization weaken in 2006 following a surge in credit costs. The sector’s defaulting crisis in 2005-2006 led the bank to post a net loss of NT$11.3 billion in 2006.
Since then, Cosmos has gradually reduced exposure to unsecured consumer lending and made efforts to expand into mortgages, corporate loans and fee-based wealth management business. Cash cards represented about 25 percent of its total loan portfolio as of the end of June, compared with more than 40 percent in 2006.
In the first eight months of this year, Cosmos reported a pre-tax profit of NT$2.05 billion, with a net value of NT$14.17 billion, FSC data showed.
On Sept. 24, Taiwan Ratings Corp (中華信評) said it was revising the outlook on Cosmos’ long-term issuer credit rating to positive from stable on Sept. 24, while affirming its “twBBB-” long-term and “twA-3” short-term ratings on the bank.
The latest capital reduction plan, its fourth since 2007, and new share issues will be submitted to its shareholders for approval at an extraordinary shareholders meeting scheduled to be held on Nov. 23, the company said.
Cosmos shares rose 1.14 percent to NT$7.97 yesterday, outperforming the TAIEX, which fell 0.03 percent. The stock has risen 27.52 percent so far this year, compared with the 8.63 percent increase on the TAIEX.
ARTIFICIAL INTELLIGENCE: The chipmaker last month raised its capital spending by 28 percent for this year to NT$32 billion from a previous estimate of NT$25 billion Contract chipmaker Powerchip Semiconductor Manufacturing Corp (力積電子) yesterday launched a new 12-inch fab, tapping into advanced chip-on-wafer-on-substrate (CoWoS) packaging technology to support rising demand for artificial intelligence (AI) devices. Powerchip is to offer interposers, one of three parts in CoWoS packaging technology, with shipments scheduled for the second half of this year, Powerchip chairman Frank Huang (黃崇仁) told reporters on the sidelines of a fab inauguration ceremony in the Tongluo Science Park (銅鑼科學園區) in Miaoli County yesterday. “We are working with customers to supply CoWoS-related business, utilizing part of this new fab’s capacity,” Huang said, adding that Powerchip intended to bridge
Microsoft Corp yesterday said that it would create Thailand’s first data center region to boost cloud and artificial intelligence (AI) infrastructure, promising AI training to more than 100,000 people to develop tech. Bangkok is a key economic player in Southeast Asia, but it has lagged behind Indonesia and Singapore when it comes to the tech industry. Thailand has an “incredible opportunity to build a digital-first, AI-powered future,” Microsoft chairman and chief executive officer Satya Nadella said at an event in Bangkok. Data center regions are physical locations that store computing infrastructure, allowing secure and reliable access to cloud platforms. The global embrace of AI
RIDING AI WAVE: : Most of its NT$15bn capital budget would be spent on packaging technologies used in AI and HPC chips and advanced testing technology, it said Chip testing and packaging service provider Powertech Technology Inc (PTI, 力成科技) plans to increase this year’s capital expenditure by 50 percent to expand capacity to meet growing demand for advanced memorychips used in artificial intelligence (AI) products. The company proposed to spend NT$15 billion (US$460.94 million) to expand advanced capacity and equipment, compared with a budget of NT$10 billion it planned three months ago. “We are seeing a recovery in market demand as well as new business opportunities. We will spend heavily on advanced packaging” equipment, Powertech chief executive officer Boris Hsieh (謝永達) told investors on Tuesday. “We will focus on ramping
INFLATION WATCH: A rate hike in March would help keep inflation at 2.16 percent this year, although a weak currency and higher electricity rates are an issue, S&P said Moody’s Ratings and S&P Global Ratings have reaffirmed Taiwan’s sovereign credit ratings at “As3” and “AA+” respectively with a stable outlook on the back of high income and wealth levels, a strong institutional framework and robust external positions. The affirmations came as Taiwan’s economy is gaining momentum after quarters of slowdown induced by stubborn global inflation and monetary tightening. Taiwan’s strong fiscal and external buffers have improved relative to peers as evidenced by recent shocks linked to the COVID-19 pandemic and the ongoing US-China technology dispute, the two ratings firms said. “Taiwan stands as the epicenter of the global semiconductor supply chain, accounting