Print

Mail

wiki links

Cathay Financial to raise assets via acquisitions

Cathay Financial Holding Co (國泰金控), Taiwan's largest financial services company, said it plans to boost assets by half within three years to more than US$100 billion by acquiring smaller lenders.

The company, which bought United World Chinese Commercial Bank (世華銀行) last year, may acquire one or more lenders to help increase its number of branches to as many as 250 from 108, said Cathay Financial Chief Strategy Officer Lee Chang-ken (李長庚).

"Financial mergers and acquisitions are a must," said Joanne Yang, a Taipei-based bank analyst at Yuanta Core Pacific Securities Co (元大京華證券). "Though Cathay Financial is the biggest, it's still comparatively small in the region. In the future, the competition won't be in Taiwan alone."

With a population of 23 million people, Taiwan has about 50 domestic lenders and the government is trying to get financial companies to merge to increase their size and reach so they can compete with foreign banks.

"It will be faster to increase the bank's assets and bank branches through mergers and acquisitions," Cathay's Lee said. Cathay Financial has about US$67 billion of assets.

The Ministry of Finance plans to seek merger partners for state-controlled banks such as First Financial Holding Co (第一金控), Hua Nan Financial Holdings Co (華南金控), Mega Financial Holding Co (兆豐金控) and Chang Hwa Commercial Bank (彰化銀行), local media reported.

Cathay Financial shares rose NT$2.10, or 4.3 percent, to NT$51.50 at close of trading. Mega Financial, Taiwan's third-largest financial company by market value, rose NT$0.40, or 2 percent, to NT$20.40.

The combined assets of Cathay United Bank (國泰銀行) and United World account for 39 percent of Cathay Financial's assets as of September. Through acquisitions, banking assets may account for about half of the company's total, Lee said.

Cathay Life Insurance Co (國泰人壽), Taiwan's largest life insurer, accounted for 61 percent of the total assets as of September.

Cathay Financial expects the worst is over for insurers, and forecasts interest rates to rise in the next few years, Vice Chairman Tsai Chen-yu (蔡鎮宇) was cited by a Chinese-language newspaper as saying.

The nation's central bank cut its key interest rate 15 times from December 2000 to June 2003 to a record low. Falling rates have shaved returns on fixed-income investments for life insurers, which have to pay higher returns promised on older policies.

Every percentage point increase in interest rates will add as much as NT$8 billion (US$234 million) of profit at Cathay Life Insurance, the company said.
This story has been viewed 1710 times.