Chang Hwa to sell its stake in Taiwan Business Bank

Chang Hwa Commercial Bank (彰化銀行), the nation's seventh-largest bank by assets, plans to sell all its 6.8 percent stake in Taiwan Business Bank (台灣企銀) as part of a government program to cut the number of lenders under its control.

State-run Chang Hwa's board on Friday approved the sale of about 290 million shares in Taiwan Business Bank, which is also controlled by the government, Taichung-based Chang Hwa said in a statement to the Taiwan Stock Exchange. The shares are valued at NT$2.41 billion (US$72.6 million) based on Taiwan Business Bank's closing price on Friday.

The government is seeking to consolidate its almost 50 lenders as it opens the US$700 billion banking market up to overseas investors such as Citigroup Inc and HSBC Holdings Plc. A merger between state-owned Mega Financial Holding Co (兆豐金控) and Taiwan Business Bank will complete President Chen Shui-bian's (陳水扁) target of having three lenders each controlling at least 10 percent of the nation's banking market.

Mergers in the industry "help the banks become larger, and that's a good thing for them due to the competition" with other lenders, said Simon Chao (趙永宏), who helps manage US$2.5 billion at President Investment Trust Corp (統一投信). The trust holds "relatively little" financial stock, he said.

Shares of Taiwan Business Bank rose 0.2 percent to close at NT$8.32 on Friday.

Chang Hwa, Hua Nan Financial Holdings Co (華南金控) and First Financial Holding Co (第一金控) may sell their stakes in Taiwan Business Bank to Mega Financial, according to local media reports. These banks are all controlled by the government.

"We aren't targeting any specific buyers and will sell the stake to whoever offers a good price," Hsieh Chao-nan (謝昭南), spokesman for Chang Hwa, said in a phone interview. The lender hasn't set a timetable for the planned sale, he said.

Mega Financial, Taiwan's second-biggest financial company by assets, on Dec. 16 made an open offer to buy as much as 26 percent of Taiwan Business Bank in the first step toward an acquisition. Mega Financial said it will pay no more than NT$9 for each Taiwan Business Bank share.