Int. Bank of Taipei, SinoPac talk of merger

International Bank of Taipei (台北國際商業銀行) and SinoPac Financial Holdings Co (建華金控) said they may merge to create a bank with combined assets of NT$961 billion (US$30.5 billion), as part of Taiwan's government efforts to create fewer, larger lenders.

"We'll hold a board meeting today [Thursday] at 3pm to discuss the merger proposal with SinoPac Holdings," said Eugene Huang, executive vice president of International Bank, in a telephone interview. He didn't give other details.

A merger between SinoPac, which has a market capitalization of NT$74 billion, and International Bank, with NT$54 billion, would create Taiwan's 11th-largest lender by asset value. Taiwan's bank regulator said it's offering the nation's 49 banks and 14 financial holding companies, which service a population of 23 million people, incentives to merge.

"It's surely good for both banks as mergers are the only way to solve the over-crowded banking problem," said Michael On, who manages the equivalent of US$30 million as managing director at Beyond Asset Management Co in Taipei.

"They must become bigger to compete," he said.

As of Sept. 30, SinoPac had assets of NT$569 billion, while International Bank had NT$392 billion.

"We are in merger talks with several candidates and International Bank of Taipei is just one of them," SinoPac's spokesman and executive vice president, Kevin Peng (彭康雄) said. He declined to confirm local newspaper reports that SinoPac's board will discuss a merger today.

SinoPac shares ended unchanged at NT$18.80, after falling as much as 1.1 percent. International Bank shares dropped US$0.30, or 1.2 percent, to NT$24.40, falling for the second day.

Taiwan banks' asset quality has improved after the government urged lenders to write off bad loans. The island's overdue loan ratio fell to 2.8 percent at the end of last year, down from a record 8 percent in March 2002, according to the Financial Supervisory Commission.

The Financial Supervisory Commission, the nation's top financial regulator, said in September it would offer incentives to encourage banks to merge.

Taiwan's government aims to halve the number of financial holding companies on the island in two years to help them compete with foreign rivals such as Citigroup Inc and HSBC Holdings Plc.

Citigroup, the world's largest financial services company, is the most profitable foreign bank in Taiwan, and many of its former employees have become executives at local banks. HSBC Holdings PLC, Europe's largest bank by market value, said on Oct. 21 it plans to boost staff numbers in Taiwan by 500 employees, or 28 percent, within the next few years to boost sales.

Fubon Financial Holding Co (富邦金控), Taiwan's second-largest financial services group by market value, wants to make an acquisition "as soon as possible," Chairman Daniel Tsai (蔡明忠) said in an interview published earlier this month.

Fubon paid US$2.5 billion to acquire Taipei Bank (台北銀行) in August 2002.