Wed, Jan 30, 2002 - Page 17 News List

Holding companies may soon dwindle in number

CONSOLIDATION An economics expert said that once the number of banks in Taiwan have been reduced, the number of financial holding companies will also decline

By Joyce Huang  /  STAFF REPORTER

Intense competition in the financial sector for suitable partners and market share is spurring many of the 13 government-licensed financial holding companies (FHCs) to accelerate their start-up plans. But one pundit predicted yesterday that only three to five of them will eventually survive after consolidation in the sector is realized.

"Within the next three to five years, we are expected to see another round of consolidation among FHCs since Taiwan's market will be again over-crowded with FHCs," said Wu Tsai-yi (吳再益), director of the economics department at Taiwan Research Institute.

Following Taiwan's WTO entry, it will be an inevitable trend for Taiwan's banking sector to "team up against international competitors via strategic alliances," he said.

The government has been encouraging and licensing banks to consolidate through mergers and acquisitions. The legislature recently fast-tracked passage of related FHC laws to facilitate the move. So far, shares of five newly founded FHCs, including Cathay (國泰金控), China Development (中華開發金控), Hua Nan (華南金控), Fubon (富邦金控) and E. Sun (玉山金控), have been traded on the local stock market, while shares of Taishin FHC (台新金控) and Chiao Tung Bank FHC (交通銀行金控) are about to begin trading next month.

Among them, Taishin yesterday revealed its management strategy to assure investor confidence in the new company's future prospects. Announcing plans to be listed on Feb. 18, Taishin International Bank Chairman Thomas Wu (吳東亮) yesterday said that he estimated that the merger between his bank and Dah An Commercial Bank (大安銀行) would create an earning per share of NT$1.6 by the end of this year.

With capital of NT$45 billion, Taishin is expected to provide one-stop financial services to over 3.5 million customers at its 133 branch offices, he said yesterday, adding that the consolidation would save an estimate NT$600 million to NT$700 million per year in costs within the next three years.

Praising the bank-turned-holding-company, Wu said that the new company's non-performing loan (NPL) ratio is expected to be reduced to 2.24 percent this year and have an after-tax income of nearly NT$5 billion.

The commercial bank currently has an NPL ratio of 3.62 percent, which is estimated to increase to 5.41 percent after the merger with Dah An Commercial Bank.

Nevertheless, employees at both institutions fear massive layoffs will soon occur.

"We have no plans to streamline the holding company," Wu said. "Retraining and relocating staff, though, will take place."

Taiwan Securities Co (台証證券) and Taishin Bills Finance Corp (台新票券) are scheduled to join the planned financial holding company in the second quarter of this year once the share swap ratio is negotiated in their June share holder meetings, Wu said.

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