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Analysts unenthusiastic about plan to float bank

Analysts appeared lukewarm about the government's plan to sell abroad shares of the state-run Bank of Taiwan (台灣銀行) abroad, Taiwan's largest lender by assets, citing little feasibility and less appeal for foreign investors.

"Bank of Taiwan, whose business includes the issuance of currency, is actually like the nation's small central bank," Shirley Yang (楊慶祺), a fund manager who manages a NT$1.2 billion (US$35.8 million) portfolio at Invesco Taiwan Ltd (景順投信), said in a phone interview yesterday.

The feasibility of selling the bank's shares to overseas investors seemed low, as this could spark concern about foreign involvement in the nation's currency policy, Yang said. Cultural differences would be another issue for the state bank to overcome, she added.

Given that the bank does not trade on the local bourse, there is no benchmark to refer to when setting a market price, the analyst said, and this could make it more controversial and difficult to get a nod of approval from lawmakers to sell state holdings in the bank.

The plan to sell the bank's shares was announced by Premier Frank Hsieh (謝長廷) in a Cabinet meeting on Wednesday. He said the government planned to sell 20 percent to 30 percent of stakes in the bank overseas, after merging it with other local lenders, in an attempt to introduce foreign funds and management into the wholly state-owned bank.

This could further invigorate the bank and sharpen its competitive edge, Hsieh said. He did not give a timeframe for the plan.

Bank of Taiwan's spokesman Chou Wu-hsiung (周武雄) was not available for comment yesterday, while the bank's public relations department said "it is inappropriate to comment" on the scheme proposed by the Executive Yuan.

The bank is the nation's largest lender with assets worth NT$2.53 trillion, or nearly 10-percent market share, as of June, according to the Banking Bureau's latest figures.

Hsieh's remarks came after the government's effort to consolidate the crowded banking sector encountered a setback, as the share sale of the state-run Taiwan Business Bank (台灣企銀) failed in September amid growing public criticism of banking reforms.

The government has vowed to cut the number of state banks to six by the end of this year. To meet this goal, the financial regulator has planned to merge the Bank of Taiwan with the Land Bank of Taiwan (土地銀行) and likely the Central Trust of China (中央信託局).

"The bank is the biggest but not one of the best," said Karl Tseng (曾志峰), a fund manager who tracks the nation's banking sector and manages a fund of NT$830 million at HSBC Investments (Taiwan) Ltd.

As a non-publicly traded bank with a less than bright performance in return on assets, the Bank of Taiwan does not appear attractive enough to foreign investors in neither financial investment nor strategic holdings, Tseng said.
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