The planned merger between Taishin Financial Holding Co (台新金控) and Shin Kong Financial Holding Co (新光金控) might take more than a year to conclude, meriting the removal of the two conglomerates and their subsidiaries from the credit watch list, Taiwan Ratings Corp (中華信評) said on Thursday.
The local arm of S&P Global Ratings placed the life insurance-focused Shin Kong Financial and the bank-oriented Taishin Financial under credit watch on Aug. 27 last year when the two announced the merger plan via share swaps.
“We believe the merger would require more time, giving us more time to assess the rating direction,” Taiwan Ratings credit analyst Eunice Fan (范維華) said.
Photo: CNA
Fan expects a time frame of 12 to 18 months, up from three to six months previously, to evaluate the rating direction of the combined group, and gain a better understanding of the integration and post-merger business and financial plans.
Taiwan Ratings stands by the negative outlook on Taishin Financial and Taishin Life Insurance Co (台新人壽). At the same time, it affirmed its “developing outlook” credit rating on Taishin International Bank (台新銀行).
The merger would soften Taishin Financial’s credit profile, because Shin Kong Financial is weaker financially, but will constitute a significant part of the combined group, Fan said.
The two sides have agreed to name the new entity Taishin-Shin Kong Financial Holding Co (台新新光金控), which would be Taiwan’s fourth-largest financial services provider by assets.
Taishin Financial would need additional resources to manage the integration given the large scale of both groups and the wide variety of units, Fan said, adding that synergy benefits would emerge only after effective integration.
Taishin Financial has delivered stable profitability, while Shin Kong Financial has stayed mostly in the red.
That explained why Taiwan Ratings affirmed its ratings on Shin Kong Financial with a positive outlook on the grounds that Shin Kong Financial’s credit profile would improve after the merger.
The agency also removed Shing Kong Financial, Shin Kong Life Insurance Co (新光人壽), Shin Kong Commercial Bank (新光銀行) and MasterLink Securities Corp (元富證券) from the credit watch list.
The positive outlook reflects Shin Kong Life’s stabilizing financial performance and expected benefits from the merger over the next 12 to 24 months, said Effie Tsai (蔡怡君), another Taiwan Ratings credit analyst.
The insurer posted a profit amid a somewhat favorable capital market last year, reversing losses in the previous two years, Tsai said.
Furthermore, capital increases likely bolstered Shin Kong Life’s risk-based capital ratio from 176 percent in 2023 to 220 percent last year, meeting the minimum requirement of 200 percent, the analyst said.
However, Shin Kong Financial was the only listed financial institute in Taiwan to record a loss last month, with the group pinning the blame on its life insurer.
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