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May 30, 2017

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Acquisition lifts Fubon Financial shares

TAIPEI -- Shares of Taiwan's Fubon Financial Holding Co. moved higher Friday morning after it announced that it will acquire an 80-percent stake in China-based First Sino Bank, dealers said.

The buying reflected high hopes that Fubon Financial will gain an advantage over other Taiwanese financial institutions in the huge China market by tapping into First Sino Bank's existing business network, dealers said.

As of 11:13 a.m., shares of Fubon Financial had climbed 1.75 percent to NT$34.85 (US$1.20), with 18.19 million shares changing hands. The benchmark weighted index was up 0.33 percent at 7,673.28 points.

"It seems that investors are happy with Fubon Financial's business expansion in China," Hua Nan Securities analyst Henry Miao said. "With the presence of First Sino Bank, Fubon Financial is likely to absorb more Chinese yuan deposits and extend more Chinese yuan loans."

Fubon Financial announced Thursday that it and its fully owned subsidiary Taipei Fubon Commercial Bank will spend about NT$30.6 billion in total to acquire a 29-percent and 51-percent stake, respectively, in First Sino Bank.

First Sino Bank, established in 1997, is headquartered in the Lujiazui Financial District in Pudong, Shanghai. Fubon's acquisition is the first financial joint venture across Taiwan Strait.

The Chinese bank's shareholders currently include Hong Kong-registered Lotus Worldwide Ltd, Shanghai Pudong Development Bank and Wing Hang Bank. Lotus Worldwide is run by Taiwanese investors.

After the acquisition, Shanghai Pudong Development Bank will retain a 20-percent stake in First Sino Bank.

At present, First Sino Bank operates four branches and 10 sub-branches, largely conducting business in cities in the Yangtze River Delta, Pearl River Delta, and Tianjin Bohai Economic Rim.

As of the end of 2011, First Sino Bank's nonperforming loan ratio stood at 0.15 percent and its return on equity at 13.5 percent.

In 2008, Fubon Financial acquired a 19.99-stake in Xiamen City Commercial Bank through its unit Fubon Bank (Hong Kong).

"The acquisition of a stake in First Sino Bank shows Fubon Financial's ambitions to penetrate the China market," Miao said. "Aided by its rich experience in business operations in Taiwan, Fubon Financial is expected to expand its reach on the mainland at a faster pace."

Miao said, however, as Fubon Financial is planning to raise NT$20 billion-NT$25 billion in capital for the acquisition, its earnings per share will be diluted to some extent.

"After the current gains in share price, it is likely that some investors will lock in profits due to concerns over a drop in earnings per share," Miao said, adding the Fubon Financial shares may face stiff technical resistance ahead of NT$36.00.

Fubon Financial said the capital increase is expected to reduce its EPS by no more than 6.2-7.2 percent.

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