Cathay's shopping for smaller banks

Approaching its first anniversary since its merger with United World Chinese Commercial Bank (世華銀 行) last October, the Cathay United Bank (國泰世華銀行) yesterday announced its intention to acquire smaller banks.

"By acquiring other banks, we hope to expand our branches from the current 108 to 150 nationwide," Chairman Gregory Wang (汪國華) said after a press conference. "We have been in talks with several small banks." Wang refused to elaborate on potential allies the bank has talked with.

As the bank's parent company, Cathay Financial Holdings Co (國泰金控), has shown interested in bidding for debt-ridden Chung Shing Bank (中興銀行) at year's end, Wang said the company will decide whether to make a bid based on the bidding prices.

One possible acquisition for the nation's largest financial services provider is Lucky Bank Taiwan Inc (第七商銀), a Chinese-language business daily reported yesterday.

Cathay Financial could expand its market presence in central Taiwan with Lucky Bank, which has 32 outlets, via a share swap at year's end, the report said.

Lee Chang-ken (李長庚), executive vice president of Cathay Financial, said he has no comment on the issue.

“We don't comment on reports about merge cases before any concrete decision is made,” Lee said in a phone interview.

Lee said the firm wants to build up Cathay United Bank to have 10 percent of the market from its current 4 percent, or 5.5 million customers.

After merging with United World Chinese Commercial Bank, Cathay United Bank's total assets have increased from NT$858.9 billion at the end of last year to NT$941.8 billion now.

For the first eight months of the year, Cathay United Bank posted pre-tax income of NT$13.2 billion and after-tax profit of NT$10.5 billion with earnings per share of NT$2.43.

Wang said for the whole year, the bank expects to report pre-tax income of NT$17 billion and after-tax profit of NT$13 billion. He said he hopes to see an annual growth rate of 10 percent as the merged bank moves into its second year.

Kong Jaw-sheng (龔照勝), chairman of the Financial Supervisory Commission, said on Sept. 2 that he will offer incentives to banks to merge. The nation's 50 banks serve a population of 23 million people.

Kong, Taiwan's top financial regulator, said he expects the creation of one bank with a market share exceeding 10 percent within a year.

Cathay Financial posted a 9.5 percent drop in second-quarter net income from a year earlier. Cathay Financial shares advanced NT$1 to close at NT$63.