Yuanta Acquisition of TC Bank ( Fight for ROE Enhancement )

Transcription

1 Yuanta Acquisition of TC Bank ( Fight for ROE Enhancement ) August 21,

2 Contents Transaction Summary Financial Rationale Strategic Rationale Synergies 1

3 Transaction Summary Description Ta Chong Bank ( TC Bank ), 2847.TT to become a subsidiary of Yuanta Financial Holdings ( Yuanta ), 2885.TT Structure Combination of cash and share swap Timeline Approved by board meetings of both companies : August 21, 2015 Approved by EGM of both companies: October 13, 2015 Pending regulatory approval 2

4 Transaction Summary - Transaction Price * TCB Common Shares: 2,789 mn Cash Shares Yuanta Shares Total Amount: NT$ 42,063 mn Total Transaction Amount: NT$ 56,548 mn Unit: NT$ mn Equity TC Bank 2Q15 34,458 TCB ECB: US$ 350mn Total Amount: NT$ 14,485 mn Estimated Equity after ECB Conversion P/B (X) 44, Yuanta will convert the ECB into shares resulting in capital injection to TC Bank * 1 TCB share in exchange for Yuanta shares and NT$ 8.15 in cash The share swap ratio was calculated by averaging Yuanta s share price for the periods of 20 days, 40 days, and 60 days before the date of signing the Binding Term Sheet-Share Swap with TC Bank. This average, after stock dividend adjustments, was

5 Transaction Summary - New Preferred Shares Issued to Replace Old Ones Yuanta Preferred Shares Non-Participating Amount: NT$ 4,000 mn Price: NT$ 40 per share Rate: 3.7% Shares: 100,000,000 Maturity Date: N/A but callable after December 21, 2017 Fixed Rate Instead of Earning Participation TCB dividend payout Unit: NT$ mn ( ) ( *90%) / 4,000 TCB Initial NT$ 4,000 mn Record Date: December 20, 2007 Price: NT$ 17 per share Rate: 3.25% Shares: 235,294,118 20% Capital Reduction 8% Common Share % Preferred Share formula 3.7% Shares: 188,235,295 Maturity Date: N/A but callable 10 years after issuance [130,000,000 / (188,235,295 * 10) ] Participating In the event that the dividends of common shares exceed those of preferred shares, holders of preferred shares will receive an amount to make up the difference. 4

6 Transaction Summary - Timeline October January 2016 Application for regulatory approval - Fair Trade Commission - FSC - Investment Commission - Taiwan Stock Exchange August 2016 Integration of Yuanta Bank and TC Bank OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP October 13, 2015 February 2016 EGMs of both companies to approve the transaction Expected completion of transaction 5

7 Financial Rationale - ROE Enhancement Unit: NT$ mn Yuanta FHC TC Bank Pro-forma Shareholders equity 176,292 ( after dividend payouts) 34, ,551 Paid-in Capital 107,130 ( after dividend payouts) 12,857 ( new shares issued ) 119,986 Net Income 7,585 1,544 9,129 ROE (annualized) 8.8% 9.2% 10.5% 19% EPS % 1) Data as of June 30, ) Sources: Yuanta FHC ; TC Bank 6

8 Strategic Rationale - Fight for ROE Enhancement Enhance Bank Earning Contribution Securities Overseas Diversification bank broker Historical ROE Performance Domestic Banks Domestic Brokers R E 1) The ROE calculation for domestic banks is earnings before tax; that of domestic brokers is earnings after tax 2) Source: Taiwan Banking Bureau and Taiwan Securities Association 7

9 Strategic Rationale - Building a Regional Network Securities Regional Footprints Yuanta Hong Kong Yuanta Korea Yuanta Indonesia First Sec. (Vietnam) Equity: NT$ 7,794 mn Ownership: Equity: NT$ 27,692 mn Ownership: 52.7% Equity: NT$ 652 mn Ownership: 99% Equity: NT$ 508 mn Ownership: 44.7% TY Cambodia London Sales Office China Rep. Office Equity: NT$ 340 mn Equity: NT$ 95 mn Ownership: Beijing ; Shanghai; Shenzhen Bank Regional Footprints Yuanta Saving Bank (Philippines) Equity: NT$ 255 mn Ownership: HK Rep. Office Myanmar Rep. Office 1) Data as of June 30, 2015 and all numbers are un-audited 2) Sources: Yuanta Securities; Yuanta Bank 8

10 Total Deposits Total Loans Total Assets Strategic Rationale - Scale Matters Earnings Performance by Private Domestic Banks Become Tier I Bank by Asset Size Pro-forma Mkt. Share: 2.9% UnitL NT$ bn Total assets (private domestic banks) Pre-tax ROE ,227 (#15) Tier I Tier II Tier III > 1, ,000 < % 10.4% 10.5% Pro-forma Mkt. Share: 3% (#15) UnitL NT$ bn 1) Data as of May 31, 2015 and all numbers are un-audited Pro-forma Mkt. Share: 3% (#15) Source: Taiwan Banking Bureau Yuanta Bank TC Bank 1) Data as of May 31,

11 Strategic Rationale - A More Balanced Structure Revenue Structure UnitL NT$ mn YB TC Bank Pro-forma Pro-forma Interest Income Fee Income Other Income 3,655 1,326 1,122 60% 22% 18% 2,719 1, % 27% 17% 6,374 2,648 1,924 58% 24% 18% Other Income Fee Income 18% 24% 58% Interest Income Total Revenue 6,103 4,843 10,946 UnitL NT$ bn Deposit Structure YB TC Bank Pro-forma Pro-forma NTD Demand Deposits NTD Time Deposits Postal Savings Redeposit & Others FCY Deposits Total % 38% 1% 21% % 49% 2% 20% % 41% 1% 21% FCY Deposits 21% 1% Postal Savings Redeposit & others 36% 41% NTD Demand Deposit NTD Time Deposit 1) Data as of June 30, 2015 and all numbers are un-audited 2) Data represents the consolidated figures for Yuanta Bank and the TC Bank parent company, respectively 3) Sources: Yuanta Bank; TC Bank. 10

12 Strategic Rationale - A More Balanced Structure Loan Structure Unit: NT$ bn Corporate Lending YB TC Bank Pro-forma % % % Consumer Lending Corporate Lending SME Lending General Corp. Lending % 28% % 12% % 22% 37% 44% FCY Lending Consumer Lending % 37% % 55% % 44% 63% 56% Mortgage % % % Unsecured Personal Loans 1.2 0% % % YB Pro-forma Others Non-Accrual Loans Total Loans % 0% % 0% % 0% 1) Data as of June 30, 2015 and all numbers are un-audited 2) Sources: Yuanta Bank; TC Bank NIM Spread TCB TCB YB YB 11

13 Strategic Rationale - Asset Quality Remains Strong YB TC Bank Pro-forma NPL NT$ mn ,208 NPL Ratio Total Reserves NT$ mn 0.20% 0.09% 0.16% 5,823 4,741 10,564 Coverage Ratio General Provision 610% 1,870% 875% 1.22% 1.73% 1.41% 1) Data as of June 30, ) Taiwan Banking Bureau 12

14 Synergies - NT$ 744 mn Projected Synergies Annually by 2019 Key Highlights Lower funding cost for Yuanta Bank : NT$ 574 mn - The acquisition of TC Bank gives Yuanta Bank a more extensive branch network to match securities branch allocation and allows it to transfer an additional NT$ 40bn in settlement cash from Yuanta Securities to lower its funding cost Lower IT operational expenses through the integration of IT infrastructure: NT$ 170 mn YB Settlement Cash Deposit Unit: NT$ bn Q Q14 from Polaris Securities Total Settlement Cash of YS : NT$ 240bn Yuanta Bank 62.5% Settlement Cash Transfer Plan North YS: 161 YB:88 + TCB: 67 55% 59% 51% Unit: NT$ bn % Central 22% 24% 10% Other Banks 1) Data as of July 31, 2015 South Sources: Yuanta Securities; Yuanta Bank; TC Bank 23% 17% 39% funding cost saving

15 Disclaimer This presentation and the presentation materials distributed herewith include forward-looking statements. All statements that address activities, events or developments that Yuanta Financial Holding Co., Ltd. ( Yuanta ) and Ta Chong Bank ( TCB ) expect or anticipate will or may occur in the future (including but not limited to projections, targets, estimates and business plans) are forward-looking statements. Yuanta s and TCB s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to price fluctuations, actual demand, exchange rate fluctuations, market shares, competition, changes in legal, financial and regulatory frameworks, international economic and financial market conditions, political risks, cost estimates and other risks and factors beyond our control. In addition, Yuanta and TCB make the forward-looking statements referred to herein as of today and undertake no obligation to update these statements. 14