Fri, Jul 23, 2004 - Page 11 News List

Mega Financial expands investment banking unit

BETTER MONEY Underwriting and derivatives are looking pretty good to the financial giant, as making a living in other areas of its business has gotten tough


Mega Financial Holding Co (兆豐金控), Taiwan's second-largest financial company, said it is expanding its investment-banking business to win more fees to compensate for interest-income margins that have fallen as competition has increased.

The government-controlled financial holding company is setting up an investment-banking team to strengthen the underwriting, derivatives and direct-investment business at its existing units. The team will also start providing financial advice, leveraged buyout and asset-securitization services, said Joseph Shieh (謝劍平), an executive vice president at Mega.

Barits International Securities Corp, Mega's brokerage arm, was ranked No. 6 in arranging equity and equity-linked sales for Taiwanese companies in the first half of the year, with 5.6 percent of the market.

It trailed Goldman Sachs Group Inc, Deutsche Bank AG and KGI Securities (中信證券), the top three underwriters in the first half with a total market share of 30 percent, Bloomberg data show.

"It's getting more and more difficult to earn interest income as margins continue to narrow," Shieh said.

"The move aims to explore new sources of income and leveraging our strengths within the holding company," he said.

Mega earlier said it had an unaudited first-half profit of NT$10.4 billion (US$303 million), of which about half came from net interest income and 16 percent from fees income.

As a result of increased competition, the company saw its net-interest margin squeezed to 1.9 percent in the first half, compared to slightly more than 2 percent at the end of last year and 2.5 percent in 2002, said Grace Lin, senior vice president at Mega.

The company, which has about 200,000 corporate clients, including Chi Mei Optoelectronics Corp (奇美電子) and Hon Hai Precision Industry Co (鴻海精密), will first try to tap corporate clients at its two banking units for new business, Shieh said.

Separately, Mega said it is studying the feasibility of expanding into life insurance. Mega won't rule out the possibility of partnering with a life insurer or acquiring one, Shieh said.

Mega, one of 14 financial-holding companies in the nation, needs to compete with Taiwan's more than 700 financial institutions for the business of its 23 million people. Formed in 2002, Mega's units include Chiao Tung Bank (交通銀行), Barits International, Chung Hsing Bill Finance Corp (中興票券), International Commercial Bank of China (中國國際商銀), Chung Kuo Insurance Co (中國產險), Mega Investment Trust Corp (兆豐投信) and Mega Asset Management Corp (兆豐資產管理).

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