CTB Financial Holding Co (交銀金控) said it's considering buying a life insurance company and another bank once it wins approval for its merger with fellow state-owned lender International Commercial Bank of China (中國商銀).
CTB, which owns Taiwan's 12th-largest lender, is buying the seventh-largest bank to expand its network. It's also buying property insurer Chung Kuo Insurance Co (中國產險), after having bought Chung Hsing Bills Finance Corp (中興票券), International Securities Co (國際證券) and Barits Securities Corp (倍利證券).
The bank is now considering adding a life insurer and another retail lender to its stable of businesses, said Huang Feng-yi (黃豐一), CTB executive vice president.
The company bought 28 percent of International Commercial in an auction on Thursday.
"The impact on rivals' profits will be limited in the short-term, as the two banks will need at least a year to realize benefits," said George Hou, who manages about US$67 million in Taiwan stocks at JF Asset Management Ltd in Taipei.
The combination of the two state-owned banks under a new group, to be called Mega Financial Holding Co (兆豐金控), signals the government is intensifying efforts to combine the nation's several hundred banks, brokers and insurers.
"The over-banking problem hasn't been solved and the pace of consolidation will speed up when the economy improves and creates more business opportunities," Hou said. "The government can provide incentives, or even some pressure, but it shouldn't say who should merge with whom."
CTB and International Commercial shareholders will vote on their combination, first announced in May, on Monday.
"The shareholders' meeting shouldn't be a problem -- we are already the biggest shareholder" of International Commercial, Huang said.
The government twice failed in attempts to combine Bank of Taiwan (台灣銀行) with other state-owned rivals, amid wrangling over how many jobs would be cut.
"It's understandable the government got a bit pushy s the market position of state-owned financial institutions may become weaker as private rivals become bigger through mergers," said Michael Ding (丁予嘉), president of International Investment Trust Ltd (國際投信), which manages NT$110 billion (US$3.2 billion) of assets.
Consolidation of state-owned lenders is necessary to maintain a "balanced market," he said.
CTB Financial and International Commercial have about 6,580 employees, said Huang, citing the banks' estimates earlier this year. The two banks have an ongoing voluntary retirement plan to trim the number of employees, said Huang, declining to give job reduction targets.
CTB said in September that the combined entity, including Chung Kuo, will have about NT$1.67 trillion of assets with 166 outlets at home and abroad.
"It's basically a done deal, it's encouraged by both the Ministry of Finance and some of the relevant officials," said Andrew Tan, who helps manage US$100 million of Taiwan equities at Tokio Marine Asset Management Co in Singapore.
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