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TaipeiBank deal expected to prompt more consolidation

Another wave of industrial consolidation in the nation's financial sector is expected following Fubon Financial Holding Co's (富邦金控) NT$80.3 billion takeover of TaipeiBank (台北銀行), analysts said.

While Fubon has not ruled out the possibility of buying United World Chinese Commercial Bank (世華商銀) as well, Cathay Financial Holding Co (國泰金控) appears to be the more likely buyer, they said.

Fubon, the nation's second largest financial conglomerate, will swap about 1.1165 of its shares for each TaipeiBank share, it announced on Thursday.

"The merger is positive for consolidation of the banking sector," William Fong (方偉昌), a banking analyst at Primasia Securities Co, said yesterday. "It will help reduce competition and build economies of scale in the sector.

"As Fubon is likely to give up United Chinese ... Cathay will probably win the chance to buy the lender," Fong said.

Cathay, the nation's largest financial group in Taiwan with total assets of around NT$1.13 trillion, has been competing with Fubon for control of United World since last year.

United World is 27 percent owned by the government.

Fubon said it will pay NT$36, a 25 percent premium, to buy TaipeiBank, based on the city-government-controlled lender's closing price of NT$28.90.

"It is also a good opportunity for the government to release its share to the public. The price is very satisfactory," Fong said.

Taiwan's banking sector is consolidating quickly, encouraged by a government that is keen to increase efficiency in the face stronger foreign competition following the nation's WTO entry.

Since November, 14 financial holding companies have been established. But a banking analyst said market share concentration is the key.

"Financial groups that have successfully integrated their resources will earn more, increasing the pressure on small and mid-size financial institutions to consider merging with stronger groups to survive over the long term," said Sophia Cheng (程淑芬), director of Taiwan financial research at Merrill Lynch Taiwan.
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