Chiao Tung Bank, ICBC may merge under holding firm

Chiao Tung Bank (交通銀行) and International Commercial Bank of China　(中國商銀) may merge, a local Chinese-language newspaper reported yesterday.

The two banks, both partly owned by the Taiwan government, may combine under a holding company, the newspaper reported, without citing sources.

"People think it's positive," said Sophia Cheng, banking analyst at Merrill Lynch Taiwan Ltd. "Large financial groups have to move fast, or medium-sized financial institutions, if they find the right partner, could grab market share."

Taiwan's banks and other financial companies are merging to strengthen their businesses as an economy that's in recession drives up loan defaults even as competition pushes banks to accept riskier customers.

Shares of rival Fubon Group Co (富邦), which last month received government approval to form a holding company combining its insurance, banking and securities units, will start trading on the stock exchange on Dec. 19.

Last week, Chiao Tung said it would take over Chung Hsing Bills Finance Corp (中興票券) and merge it into its financial holding company.

International Commercial is also considering how it can expand its business, said Executive Vice President Chen Chi-chu (陳季筑).

"We haven't decided whether we should talk with a retail-specialized bank or [expand] internally," Chen said. "At this time, we haven't had any discussions with anyone."

The government owns more than 40 percent of ICBC and about a third of Chiao Tung Bank.