Facing stiff competition from 14 newly-established financial holding companies (FHCs), both state-run Taiwan Cooperative Bank (合作 金庫) and Chang Hwa Bank (彰化銀行) yesterday said that they are striving hard to consolidate through restructuring in order to expand market share and build up competitiveness.
"No bank should plunge into [the trend of] forming FHCs for the sake of forming FHCs," said William Tseng (
Tseng said that Taiwan Cooperative has no plans to merge with other banks in the near future since difficulties arise in releasing its state-owned shares to private partners.
However, it plans to strike a strategic partnership with foreign banks and securities houses in order to offer customers with one-stop shopping services including insurances and convertible bonds as other FHCs do, Tseng said.
To further meet its privatization goal, Taiwan Cooperative is planning to apply for a government approval to list on the local stock market, and release one percent of its NT$22 billion-worth shares to private investors by the year's end, Tseng said.
The Ministry of Finance currently owns a 60 percent stake in the bank and has said it will lower its stake to 49 percent next year, he said.
But William Fong (
"Investors are still skeptical about state-run banks' profitability and management," Fong said. "Unless their pricing [of shares] is reasonable."
But Fong applauded Chang Hwa's move to take advantage of foreign financial expertise in dealing with its non-performing loan (NPL) problem and overhaul management. He said the bank has been teaming up with the International Netherlands Group (ING) since last March in management overhaul.
Chang Hwa yesterday announced that it is planning to further restructure its management in August and will lower its NPL ratio to below 5 percent by the year's end.
"Our goal is to become the best universal bank -- an integrated financial service provider -- in Taiwan in three years," the lender's chairman Chang Po-shin (
After having written off NT$46 billion in bad loans last year, Chang Hwa plans to further write off a total of NT$20 billion in bad loans this year, lowering its NPL ratio from the current 6.29 percent to below 5 percent, said president Mike Chang (
Mike Chang said the bank plans to join forces with a foreign bank in setting up an asset management company to deal with its future bad loans sales. He did not elaborate further.
Fong, however, said Chang Hwa has to make its NPL management more transparent in order to win confidence from investors before it launches its capital increasement plan.
Taiwan Cooperative wrote off NT$34.3 billion in bad loans last year and plans to auction off another NT$10 billion in bad loans before October in order to lower its NPL ratio from the current 5.72 percent to 4.5 percent by the year's end, Tseng said.
Both Taiwan Cooperative and Chang Hwa focus on consumer-banking as their core business, but they hope to expand into corporate banking to compete with other private commercial banks.
"Profit margins in both consumer banking and corporate banking services are getting narrowed, but we'll seize any opportunities in consumer, corporate and investment banking sectors to generate profits," Mike Chang said.