Thu, Jul 31, 2003 - Page 11 News List

Bankers foresee more M&A action in Taiwan

By Joyce Huang  /  STAFF REPORTER

The desire for economies of scale is expected to motivate companies across industries to accelerate merger-and-acquisition (M&A) activities in the coming months, both local and foreign bankers said yesterday.

"The market for M&A in the [Asia-Pacific] region is [and will be] very active," said Hong Kong-based Gokul Laroia, managing director and head of Morgan Stanley's mergers and acquisitions businesses in non-Japan Asia, during a videoconference held yesterday in Taipei.

"In terms of size and activities, [South] Korea, Taiwan and China are the three markets in north Asia [where] we have seen and expect to continue to see a reasonable level of M&A activities," Laroia said.

Morgan Stanley, a leading investment bank, has helped facilitate 60 M&A transactions in the region over the past 10 months totaling over US$38 billion including the recent merger between Chinatrust Financial Holding Co (中信金控) and Grand Commercial Bank (萬通銀行).

Given Taiwan's economies of scale, Laroia said that there should ideally be three key players in the wireless-provider sector and far less than 50 banks in the financial sector to ensure a competitive and profitable environment.

"There's not a market for 50 banks in Taiwan," he said, "but whether the number should go down to 10, 15 or 20, I don't know, but something we all agree on is that the number shouldn't be 50."

At present there are 53 banks in the country.

Sharing a similar view, Eric Chen (陳聖德), president of Chinatrust Commercial Bank (中信銀), said that he expects the financial sector to speed up consolidation in the next few months.

"Once the government's Financial Restructuring Fund (金融重建基金) is activated [in September], there will be quite a few banks for sale as long as buying prices are reasonable," Chen told reporters at a luncheon yesterday.

Morgan Stanley's Taipei-based executive director Gary Kuo (郭冠 群), said that troubled banks that are to be taken-over by the government, including Chung Shing Commercial Bank (中興銀行) and Kaohsiung Business Bank (高雄企銀), would be "ideal candidates" for acquisitions in the near future.

Kuo said that many financial-holding companies, which plan to expand their presence by opening new branches, haven't been able to do so since the government sus-pended issuing licenses to open new branches.

"After writing off their bad loans, distressed banks are very valuable for their branch licenses, especially in Taipei and Kaohsiung," Kuo said, adding that Chinatrust's branches nearly doubled after buying into Grand, which has 44 branches.

Chen said the bank will have a total of 102 branches nationwide.

Chen also sided with the Ministry of Finance, arguing that the government's restructuring fund should cover debt-ridden banks' non-depository liabilities, including commercial papers and inter-bank lending, in order to avert a liquidity crisis which could devastate the banking sector.

A bill to establish the fund was shelved during a special legislative session this month because opposition parties don't want the fund to cover non-depository liabilities.

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