Cathay Financial Holding Co (國泰金控), the nation’s biggest financial services provider, yesterday said that its banking arm plans to maintain a prudent attitude when reviewing loans to Chinese companies, following a potential problem of bad debts with a syndicated loan to Chinese urban footwear manufacturer Fujian Ultrasonic Shoes Co Ltd (福建索力鞋業).
Cathay United Bank (國泰世華銀行), the banking subsidiary of Cathay Financial, in August led a US$60 million syndicated loan to Ultrasonic Shoes, whose German holding company, Ultrasonic AG, has been listed on the Frankfurt Stock Exchange for years.
However, in September, the shoemaker revealed a shocking development: Chief executive officer Wu Qingyong (吳清勇) and chief operating officer Wu Minghong (吳明鴻) had gone missing and most of its cash reserves in China and Hong Kong had disappeared.
Wu Qingyong later resurfaced, blaming problems on a lost cellphone and denying taking any money. However, the firm’s financial status remains unclear.
“We will definitely be more careful when reviewing related cases in the future... We have learned a lesson from the incident,” Cathay Financial president Lee Chang-ken (李長庚) told reporters after the company’s quarterly investors’ conference.
Lee said the company reported the case to the relevant government agencies in both Hong Kong and China, with support from the other six lenders in the syndicate.
“It will be a good opportunity to observe whether the pledge made by Chinese President Xi Jinping (習近平) last month to govern the nation according to the rule of law is genuine,” he said.
If the Chinese lenders that made loans to Ultrasonic Shoe are protected, leaving Taiwanese lenders face the credit risk alone, domestic banks would be unlikely to provide loans to additional Chinese companies in the future, Lee added.
Asked about Cathay Financial’s future development, Lee said the financial services provider would continue to seek possible mergers and acquisitions to expand its asset management business.
Last week, Cathay Life Insurance Co (國泰人壽), the life insurance arm of Cathay Financial, announced plans to acquire US-based investment management services provider Conning Holdings Corp and its subsidiaries for US$240 million.
Cathay Financial saw net income total NT$44.7 billion (US$1.45 billion), or NT$3.54 per share, in the first nine months of the year, representing a 54 percent increase from the previous year and marking the highest level in its history, the company said in a statement.
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