Sun, Feb 29, 2004 page11

• Hua Nan Financial pursues big merger

  CREATE A GIANT If the proposed merger with First Financial Holding Co goes ahead, a bank will be created with NT$2.96 trillion in assets, eclipsing the giant Bank of Taiwan

  • BLOOMBERG
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  Hua Nan Financial Holdings Co (華南金控) said it is interested in merging with First Financial Holding Co (第一金控) to become Taiwan's largest lender by assets, the Commercial Times reported, citing Hua Nan Financial Chairman Lin Ming-cheng (林明成).

  Lin said the best timing for a merger would be after the island's March 20 presidential election, the paper reported. Both banks have their headquarters in Taipei.

  A merger would create a bank with NT$2.96 trillion (US$88.8 billion) of assets, eclipsing state-owned Bank of Taiwan (台灣銀行) as the island's biggest lender, according to Bureau of Monetary Affairs figures. They would have 359 local branches and 17 overseas.

  Taiwan's financial institutions are combining in line with a government push for consolidation in an industry where more than 300 banks and community credit associations compete for the business of 23 million people.

  "The Taiwan government has made financial industry reform its top priority in the past four years and we can reasonably expect to see some mega bank merger deals this year," said Tracy Chen, who oversees US$73 million of assets at Prudential Securities Investment Trust Co (保誠投信) in Taipei.

  Hua Nan Financial and First Financial executives didn't answer calls made to their offices. The government is the controlling shareholder of both banks.

  Hua Nan Financial expressed an interest in First Financial about a possible merger, though no proposal was submitted or talks held, Ed Liu (劉茂賢), vice president at the bank, said in December.

  Barro Yang, a spokesman at First Financial's investor relations department, said in the same month that no formal proposal was made by Hua Nan.

  Taishin Financial Holdings Co (台新金控), the owner of Taiwan's second-largest credit-card issuer, also expressed an interest in merging with First Financial, the Commercial Times report said, citing Taishin Chairman Thomas Wu (吳東亮). Taishin would probably keep First Financial operating as a separate bank rather than combine it with its holding company, the report said.

  As part of its expansion plans, Taishin has been buying shares of International Bank of Taipei (台北商銀), the report said.

  Taiwan President Chen Shui-bian (陳水扁), who took office in 2000, has been promoting mergers in the industry to create fewer, larger financial institutions, which can compete with overseas banks.

  In June 2001, Chen's government set up a NT$140 billion fund to bail out bankrupt lenders. Two months later, it used the fund to take over 36 credit cooperatives burdened by bad loans.

  The Financial Holding Company Act, passed in the same year, enabled lenders and insurers to merge and acquire businesses under a holding company structure. Fourteen financial holding companies have since been formed. Banks were also offered tax incentives to merge.

  The TWSE Bank and Insurance Index rose 24 percent in the first two months of this year, compared with a 15 percent gain for the main TWSE Index.
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