The financial sector is expected to speed up its consolidation to survive in an increasingly competitive market after Fubon Financial Holding Co (
Financial institutions are aware it is time to merge or witness their profit margins being eroded and eventually wiped out in ever stiffening competition following the domestic markets opening up to meet WTO requirements.
"Banks have felt the pinch. They know they have no choice but to merge or be acquired," said Richard Tsai, head of research at Grand Cathay Securities (大 華 證 券).
Acquisitions by financial holding companies were only the first step toward further consolidation among financial holding firms, he said.
"We'll see many mergers among banks, brokerages and insurers this year and next year. I also expect to see consolidation among financial holding companies.
"The size of Taiwan's financial market can allow maintain four to five financial holding firms, but we now have about 10," he said.
Fubon Financial Holding Co announced Thursday it will buy Taipei Bank (
The deal will bring Fubon's total assets to NT$1.12 trillion.
First Commercial Bank (
"A handful of medium-size banks with sound operations and good asset quality have been targeted for acquisitions by large financial firms," Tsai said.
The government is encouraging mergers and acquisitions among financial institutions amid high non-performing loans and an overcrowded banking market.
The ratio of NPLs at domestic banks stood at 7.48 percent at the end of June, down from 8.04 percent in the previous quarter, but higher than 6.47 percent a year earlier, the central bank said Thursday. Combined with other problematic loans worth NT$1.53 trillion, the average NPL ratio at the end of June would have been 10.83 percent.
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