Chiao Tung plans merger

Chiao Tung Bank (交通銀行) announced plans to merge with Chung Hsing Bills Finance Corp (中興票券) yesterday, through a share swap, as part of the company's plan to establish a financial holding company before mid-March next year.

"The partnership will expand the bank's business scale to further increase its competitiveness," Chiao Tung Bank Chairman Cheng Shen-chih (鄭深池) said yesterday at a signing ceremony.

Cheng also used the occasion to praise the bills finance company's low 0.7 percent non-performing loan ratio.

After the merger, Chung Hsing, with initial capital of NT$28.1 billion, will play a complimentary role to Chiao Tung Bank, which mostly deals in medium and long- term loans, he said.

The partnership will also help clients of the bank's other partner -- International Securities Co (國際證券) -- to handle short-term capital funding, Cheng said.

"Chiao Tung can serve as a guarantor for the bill company's clients as well asr buy back its commercial paper to keep capital flowing," Cheng said.

Minister of Finance Yen Ching-chang (顏慶章) said yesterday that he expects the merger to strengthen both firms' business.

No timetable was set for finalizing the merger. A task force designated to evaluate the plan's effectiveness is still in the works, Chuang Kuo-hsiung (莊國雄), the bank's president, said.

"We will commission certified public accountants to review both parties' financial situation before an exchange ratio of shares is determined," Chuang said.

Given the fact that Chung Hsing's second-biggest shareholder is the KMT, which owns approximately 27 percent of its shares, concerns were raised over whether Yen had helped facilitate the merger between the KMT-related financial company and the DPP-dominant bank.

But the finance minister denied the speculation, saying "willingness by both parties has facilitated the merger."

Chung Hsing President Jack Tseng (曾廣倫) said that its major stockholders were optimistic about the merger plan, saying the consolidation was "in line with the government's financial reform efforts."

According to Taiwan Ratings Corp (中華信評), Chung Hsing wa given a rating of "tw-A/tw-A 2" in September, indicating that the company's outlook is stable.

"As long as the merger can demonstrate its strategic importance, its prospects should be good," said Yuan Shu-hsiang (阮淑祥), a manager at Taiwan Ratings.

Chung Hsing Bills was splashed across the nation's headlines in 1999 when accusations of financial impropriety mounted against then presidential candidate James Soong (宋楚瑜). Questionable third-person account transfers to the US of around US$6 million, linked to close members of Soong's family, were uncovered.