Citigroup seen taking larger stake in Taiwan’s Fubon
Taiwan's Fubon Financial Holding said on Thursday it believed Citigroup Inc, the world's largest financial group, would follow through on a long standing desire and raise its stake in the holding company.
Victor Kung, Fubon's chief financial officer, said Citigroup could raise its ownership share to more than 20 percent from 11 percent, but any deal could only be finalised after the two sides reached agreement on the pricing. He declined to give further details, and said no talks were currently going on.
Kung's comments come after Fubon Financial bought Taipeibank for US$2.4 billion in stock last month, creating the Island's fourth largest listed financial group.
After the purchase of Taipeibank, Citigroup's original 15 percent share of Fubon - bought in 2000 for US$810 million - would be diluted to around 11 percent.
"We believe Citigroup will hike its holdings in Fubon to more than 20 percent from the current diluted 11 percent, but there are no concrete discussions going on at the moment," Kung said.
"Citigroup previously had said the larger the stake it held in Fubon the better," Kung said.
Citigroup was less definitive, however.
"As a matter of policy we don't comment on speculation...we are comfortable with our current relationship with Fubon," Penny Shone, corporate affairs director of Citigroup Asia Pacific, said in a statement.
Last year, Taiwan scrapped a law restricting ownership in a bank by any one single group to a 15 percent ceiling, with the exception of state holdings.
By raising its stake to at least 20 percent, Citigroup could satisfy tax regulations that would allow it to include on its books the earnings contribution from Fubon, said Kung.
With a stake under 20 percent, Citigroup can only include dividends received from Fubon in its financial statements.
"Citibank would be able to book more profits and raise its ROE if it increased its stake in Fubon," said Sophia Cheng, a Merrill Lynch banking analyst based in Taipei, referring to the bank's return on equity ratio.
Fubon's share price jumped after the mass circulation Economic Daily News reported that Citigroup was seeking to increase its Fubon stake to 25 percent.
Shares of Fubon Financial jumped 6.74 percent to T$30.10 after the report, following a 7 percent fall, the daily maximum, on the previous session. Fubon shares contrasted with the 1.65 percent drop in the main TAIEX index.
Kung's comments come after Fubon Financial bought Taipeibank for US$2.4 billion in stock last month, creating the Island's fourth largest listed financial group.
After the purchase of Taipeibank, Citigroup's original 15 percent share of Fubon - bought in 2000 for US$810 million - would be diluted to around 11 percent.
"We believe Citigroup will hike its holdings in Fubon to more than 20 percent from the current diluted 11 percent, but there are no concrete discussions going on at the moment," Kung said.
"Citigroup previously had said the larger the stake it held in Fubon the better," Kung said.
Citigroup was less definitive, however.
"As a matter of policy we don't comment on speculation...we are comfortable with our current relationship with Fubon," Penny Shone, corporate affairs director of Citigroup Asia Pacific, said in a statement.
Last year, Taiwan scrapped a law restricting ownership in a bank by any one single group to a 15 percent ceiling, with the exception of state holdings.
By raising its stake to at least 20 percent, Citigroup could satisfy tax regulations that would allow it to include on its books the earnings contribution from Fubon, said Kung.
With a stake under 20 percent, Citigroup can only include dividends received from Fubon in its financial statements.
"Citibank would be able to book more profits and raise its ROE if it increased its stake in Fubon," said Sophia Cheng, a Merrill Lynch banking analyst based in Taipei, referring to the bank's return on equity ratio.
Fubon's share price jumped after the mass circulation Economic Daily News reported that Citigroup was seeking to increase its Fubon stake to 25 percent.
Shares of Fubon Financial jumped 6.74 percent to T$30.10 after the report, following a 7 percent fall, the daily maximum, on the previous session. Fubon shares contrasted with the 1.65 percent drop in the main TAIEX index.
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