Shin Kong Financial Holding Co (新光金控) plans to raise more than NT$10 billion (US$329.13 million) to strengthen its insurance and banking subsidiaries.
The company’s board of directors yesterday approved plans to issue 420 million common shares and 222 million special shares to raise the funds, its filings with the Taiwan Stock Exchange showed.
Shin Kong said that it would price the new common shares based on the company’s share price, while the price for special shares would likely be between NT$40 and NT$60 per share.
The company plans to inject NT$3 billion from the funds raised to Shin Kong Commercial Bank (新光銀行) and the rest into Shin Kong Life Insurance Co (新光人壽), Shin Kong Financial senior vice president Sunny Hsu (徐順鋆) told the Taipei Times by telephone.
The injection would bolster the bank’s common equity Tier 1 ratio, which stood at 10.42 percent as of the third quarter last year, compared with the industry’s average of 11.12 percent, Hsu said.
It would also help expand the bank’s asset size, which totaled NT$935 billion as of Sept. 30, he said.
“Our banking subsidiary is a medium-sized bank. We expect its asset value to surpass NT$1 trillion over the next two years so it can conduct more new business,” Hsu said.
The funds would also increase the insurance unit’s risk-based capital (RBC) ratio by between 13 percentage points and 20 percentage points, as a way to address the implementation of new International Financial Reporting Standards, Hsu said.
The insurer’s RBC ratio declined from 244 percent in June last year to 221 percent at the end of the year after the regulator lifted the risk factor for bond exchange-traded funds.
The insurer’s internal goal is to remain above 250 percent, it said.
Shin Kong is the first among the nation’s 15 financial holding firms that announced plans to raise new capital.
The new common shares would dilute the company’s earnings per share (EPS) by 3 percent, “which should be acceptable to shareholders,” Hsu said.
The firm’s board of directors on Tuesday approved a proposal to distribute a cash dividend of NT$0.4 per common share, up from the NT$0.2 it paid last year and the highest over the past decade, company data showed.
The proposed dividend, if approved by shareholders later this year, would be equivalent to a payout ratio of 29.85 percent based on last year’s EPS of NT$1.34.
With the company’s shares closing at NT$9.74 in Taipei trading on Tuesday, that proposal suggests a dividend yield of 4.19 percent.
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