[PEN-L:29549] Taiwan Bank Mergers

["Ulhas Joglekar" <joglekarulhas@xxxxxxxxxxx>]

The Financial Express

Thursday, August 15, 2002

Taiwan Banks To Expedite Merger Efforts As Competition Hots Up

Taipei, Aug 14:  Two large bank mergers in Taiwan, worth nearly $ six
billion, will force smaller rivals to speed up their search for partners in
a crowded financial sector that has been slow to reform and is dogged by bad
debts and weak profits.

Taiwan's 52 banks, striving to widen services to the island's 23 million
people, are also being spurred to merge by the lure of China as the world's
largest potential market gradually opens up.

With thousands of Taiwan manufacturers based in China, Taiwan banks have a
huge customer base just waiting to be served.

The long-delayed bank consolidation was set in motion with the $2.4 billion
merger between Fubon Financial Holding Co and government-backed Taipei Bank,
forming Taiwan's fourth largest financial group. Cathay Financial Holdings
Co Ltd, Taiwan's largest listed financial group, followed with a plan to pay
$3.4 billion in stock for United World Chinese Commercial Bank, in the
island's largest corporate takeover.

The deals created two new entrants into Asia's 10 largest financial groups
outside of Japan and Australia.

"Yes, definitely. Perhaps this will be a catalyst to speed up decision
making at these institutions," said a financial sector analyst at Goldman
Sachs based in Hong Kong.

She was referring to strong private banking firms such as SinoPac Holdings
Co, which could become a target for the three failed suitors for Taipei
Bank. They are Chinatrust Financial Holding, China Development Financial and
Yuanta-Core Pacific Securities.

Chinatrust Financial, which includes Taiwan's largest private bank, raised
$400 million in June for a takeover of a local bank. A month earlier, China
Development, the island's biggest venture capital firm, raised $575 million
for the same purpose.

"Even if you are a successful, healthy independent institution, times are
changing quickly and you have to consider joining forces with other
institutions that can bring more product to your customers," said Mr Andrew
Brown, the global banking team leader at Morgan Stanley Dean Witter in Hong
Kong.

Taiwan's move to force consolidation has come later than regional peers such
as South Korea, which has some 20 banks serving a population more than twice
that of the island.

As overdue loans continued to rise, reaching a record 8.04 per cent in the
first quarter this year - private analysts say the true level is double
that - the government became serious about consolidation as WTO entry
loomed.

- Reuters

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