Bidding farewell to bad loans and unprofitable years, the local financial sector is geared up to branch out and compete fiercely for market share both domestically and in the Asia Pacific region this year.
"The `small-and-beautiful' days are long gone," said Paul Lo (
"2005 will be a `double S' -- scale and scope -- year, and also a year full of big change, enormous challenge and fantastic opportunity," Lo said. "M&A [mergers and acquisitions] is not a strategy, it is a rule of survival."
Last year alone, Chinatrust Financial Holding Co (中信金控) acquired Fengshan Credit Cooperatives (鳳山信用合作社) in July, E. Sun Financial Holding Corp (玉山金控) took over the Kaohsiung Business Bank (高雄企銀) in September, and Taishin International Bank (台新銀行) incorporated the 10th Credit Cooperative of Hsin Chu (新竹十信) in October.
The takeovers were part of the government's goal to encourage mergers and acquisitions among about 50 banks in Taiwan.
The nation's financial regulator has said it wants to shrink the number of financial holding companies by half to seven by next year, with each of the top three controlling at least 10 percent of the market.
"2005 will be another heated year for banks to further consolidate through mergers and acquisitions," Gary Tseng (
Although further consolidation is necessary, Tseng lauded the banking sector's efforts to improve its health over the past year. The ratio of non-performing loans fell to 3.22 percent in November of last year, from 4.33 percent at the end of 2003.
As of November, the banking sector had marked 5.56 percent and 9.17 percent growth respectively in assets and net worth from a year earlier. In terms of revenues and before-tax profits, the sector marked 97 percent and 216 percent growth, respectively.
The commission also hopes to create one or two leading domestic players in the financial-service sector -- or what the commission calls "national champion" banks by next year.
McKinsey & Co said in a report last week that Taiwan's banking sector needs to undergo more M&As.
"Taiwan should significantly reduce the large number of commercial banks, with a maximum of four to seven large domestic and regional `champions' taking the lion's share of the market," the consultancy company said.
But other bankers are not so optimistic.
Victor Kung (龔天行), chief financial officer of Fubon Financial Holding Co (富邦金控), the nation's third-biggest financial services company, previously told reporters that bidding prices to acquire small rivals have risen to an unacceptable level.
To solve the price dilemma, Edward Chow (周行一), a finance professor at National Chengchi University, said the government needs to provide a catalyst for further consolidation among state-owned financial institutions.
"Once a merger deal is closed between state-owned and private financial institutions to set a good example, most players in the market will feel pressure to follow suit," Chow said.
Hua Nan Financial Holding Co (
Hua Nan Financial is among three state-owned financial service providers that have been targeted by the financial regulator as merger catalysts. The other two are First Financial Holding Co (
Consolidation may also apply to the securities sector since "small securities firms may be shaken [out of the marketplace] as the competition stiffens to benefit big players," said Susan Chu (
New business may also come from abroad, especially China, as some local financial service providers appear eager to enter the Chinese market. Fubon Financial's acquisition of Hong Kong-based International Bank of Asia (
Currently, some 10 banks have set up liaison offices there, which will be later upgraded to branches. But pundits said that no progress will be foreseeable this year given the current cross-strait tensions.
"Due to the lack of a bilateral agreement between Taiwan and China to regulate cross-strait financial transactions, Taiwanese liaison offices there are unlikely to be upgraded to branch status," Lo said.
To provide a makeshift channel for local banks to capture cross-strait businesses, Tseng said the regulator will further relax restrictions on the business scope of offshore banking units (OBUs) so as to meet China-based businessmen's financial needs.
"Offshore banking units will be the best leverage for Taiwanese banks to develop regional businesses," Tseng said.
To secure a more stable source of income, local financial institutions are beginning to sell more products and focusing efforts on the wealth management business.
According to Eric Wu (
Martin Spurling, deputy CEO and senior vice president of HSBC Taiwan's personal financial services division, also aims to tap into the asset-management market.
He said that if Taiwanese can be further educated to invest part of their cash deposits in mutual funds, this could provide one of the British bank's biggest business opportunities -- and challenges -- this year.
Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) came under pressure yesterday after a report that Apple Inc is looking to shift some orders from the Taiwanese company to Intel Corp. TSMC shares fell NT$55, or 2.4 percent, to close at NT$2,235 on the local main board, Taiwan Stock Exchange data showed. Despite the losses, TSMC is expected to continue to benefit from sound fundamentals, as it maintains a lead over its peers in high-end process development, analysts said. “The selling was a knee-jerk reaction to an Intel-Apple report over the weekend,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to remain Apple Inc’s primary chip manufacturing partner despite reports that Apple could shift some orders to Intel Corp, industry experts said yesterday. The comments came after The Wall Street Journal reported on Friday that Apple and Intel had reached a preliminary agreement following more than a year of negotiations for Intel to manufacture some chips for Apple devices. Taiwan Institute of Economic Research (台灣經濟研究院) economist Arisa Liu (劉佩真) said TSMC’s advanced packaging technologies, including integrated fan-out and chip-on-wafer-on-substrate, remain critical to the performance of Apple’s A-series and M-series chips. She said Intel and Samsung
TRANSITION: With the closure, the company would reorganize its Taiwanese unit to a sales and service-focused model, Bridgestone said Bridgestone Corp yesterday announced it would cease manufacturing operations at its tire plant in Hsinchu County’s Hukou Township (湖口), affecting more than 500 workers. Bridgestone Taiwan Co (台灣普利司通) said in a statement that the decision was based on the Tokyo-based tire maker’s adjustments to its global operational strategy and long-term market development considerations. The Taiwanese unit would be reorganized as part of the closure, effective yesterday, and all related production activities would be concluded, the statement said. Under the plan, Bridgestone would continue to deepen its presence in the Taiwanese market, while transitioning to a sales and service-focused business model, it added. The Hsinchu
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has approved a capital budget of US$31.28 billion for production expansion to meet long-term development needs during the artificial intelligence (AI) boom. The company’s board meeting yesterday approved the capital appropriation plan for purposes such as the installation of advanced technology capacity and fab construction, the world’s largest contract chipmaker said in a statement. At an earnings conference last month, TSMC forecast that its capital expenditure for this year would be at the higher end of the US$52 billion to US$56 billion range it forecast in January in response to robust demand for 5G, AI and
RSS