Wed, Jan 04, 2006 - Page 11 News List

Government pushes back Bank of Taiwan stake sale

REFORM The Ministry of Finance wants to give Bank of Taiwan time to absorb the Central Trust of China before selling its stake in the combined lender in June next year

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The government will delay a planned sale of at least US$1.6 billion of shares in Bank of Taiwan (台灣銀行) by 18 months to allow the nation's largest lender to absorb Central Trust of China (中央信託局) after its takeover of the smaller state-owned bank.

The Ministry of Finance plans to begin selling its stake in the combined lender around June next year, Finance Minister Lin Chuan (林全) said in a statement in his New Year briefing. The government had planned to reduce its stake in Bank of Taiwan to below 50 percent by the end of this year, it said.

"We'll suggest the Cabinet adjusts the schedule to complete the Bank of Taiwan privatization to June 30, 2008," Liu Teng-cheng (劉燈城), director-general of the ministry's National Treasury Department, said at the same briefing.

The Ministry of Finance said in November last year that Bank of Taiwan would buy Central Trust to form a group with 12 percent of the nation's US$700 billion banking market. The government is pushing banks to combine as it opens the industry to competition from global lenders such as Citigroup Inc and HSBC Holdings Plc.

Liu said the sale could be even bigger as Bank of Taiwan may be merged with Land Bank of Taiwan (土地銀行), the nation's third-biggest lender. The combined firm would have assets of NT$4.78 trillion (US$146 billion), Cabinet Secretary-General Cho Jung-tai (卓榮泰) said on Dec. 20.

Taiwan is studying the feasibility of combining the state-owned firms to create a lender ranking among the world's top 80 banks, Cho said. The government may sell shares in the combined lender at home and overseas, aiming to bring in expertise and foreign investors, he said.

Plans to merge the Bank of Taiwan with Land Bank of Taiwan and Central Trust, which is a wholly government-owned lender that is also involved in insurance and wharehousing, in 2000 and 2002 were scrapped after workers protested against possible job losses.

The government has received parliamentary approval to sell NT$52.6 billion of Bank of Taiwan shares, or 34 percent of its stake, between 2004 and this year, the statement said.

That figure didn't include Central Trust, Liu said, without giving further details.

Liu said the ministry has yet to sell any shares of Bank of Taiwan. He added that the parliament's approval is valid for five years.

Taiwan's banking industry is dominated by government-owned lenders and family-owned financial groups. The latter have been slow to follow the government's lead in seeking mergers.

Bank of Taiwan was formed in 1946 as the first government-owned bank after the Japanese occupation ended. It offers loans and deposits, foreign exchange, credit cards and other services at 147 branches, according to a company Web site. About 48 percent of its customers work for the military or government departments.

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