Wed, Jul 02, 2003 - Page 10 News List

Celebrations as three state banks incorporate

FINANCIAL REFORM The Bank of Taiwan, Land Bank of Taiwan and Central Trust of China have taken their first steps on the long and rocky road to privatization

By Jessie Ho  /  STAFF REPORTER

Three state-run banks, the Bank of Taiwan (台灣銀行), Land Bank of Taiwan (土銀) and Central Trust of China (中央信託局), incorporated yesterday, paving the way for their complete privatization by 2006 as part of the Cabinet's financial reform plan.

"I hope the incorporation will advance our competitiveness," said Chen Mu-tsai (陳木在), chairman of the Bank of Taiwan at the com-pany's incorporation ceremony.

The Bank of Taiwan, a 104 year-old bank with NT$48 billion in working capital, will release 52 percent of its shares between next year and 2006, Chen said.

The bank also hopes to make unloading the unused land it owns a priority, Chen said.

A Chinese-language media report in April said the Bank of Taiwan has NT$66.6 billion locked up in idle land.

Land Bank of Taiwan and Central Trust of China also celebrated their incorporation yesterday.

Wei Chi-lin (魏啟林), Land Bank's chairman and Huang Rong-shean (黃榮顯), director general of the Central Trust of China announced that the banks will set up a joint financial holding company next year with investment of NT$35 billion.

"I have confidence in our oper-ations after privatization and look forward to cooperating with the Central Trust of China," Wei said at Land Bank's incorporation celebration yesterday.

Wei said the new holding company will be listed by 2005.

"We welcome foreign investors to join the board to raise our credit rating," he said.

Market watchers generally approved of the incorporation of the three institutions.

"These banks can finally be released from the government's rigid banking policies and spread their wings," said Tseng Fan-jen, a financial analyst at KGI Securities Corp (中信證券).

State-run banks can survive without worrying about competition from private companies, but their policy-making makes it difficult to catch up with market trends and so they gradually lose business to private banks which have more appealing products, Tseng said.

Tseng said state-owned banks have also been under pressure to attain annual revenue targets set by the government, which acts to reduce their capacity to offset their increasing non-performing loans (NPLs).

Bank of Taiwan's NPL ratio was 2.66 percent at the end of May, while the Land Bank's was 6.84 percent.

A banking analyst agreed that incorporation may help these banks, but added that there are still challenges ahead.

"Their financial operations will be more transparent, but the extent of which the change will help them depends on their future personnel and business strategies," said Eunice Fan (范維華), a senior analyst at Taiwan Ratings Corp (中華信評).

Fan said her company will not change its ratings on the trio for now since no significant improvement is expected immediately.

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