Mega Financial looks overseas for profit

With most banks struggling to recover from the consumer loan debacle and vying for limited domestic market share, Mega Financial Holding Co's (兆豐金控) company chiefs yesterday laid out a three-year globalization plan to improve profits.

"As Taiwan has no natural resources and is an export-driven nation, Taiwanese companies will have to expand business abroad. The cash flow involved holds much potential for the banking sector," said Mckinney Tsai (蔡友才), president of the nation's third-largest financial services provider by assets, during a press briefing.

He said that before March next year, the company would open four branches overseas -- in Hanoi, London, Melbourne and Bangna, Thailand -- bringing the number of foreign branches to 29.

Mega Financial also plans to raise funds overseas by year's end to finance its operations. Fundraising activities will include a medium-term note in Australia worth as much as A$600 million (US$450 million) and 3 billion baht (US$79 million) of corporate bonds in Thailand, Tsai said.

It will also consider Mumbai and Dubai to further expand its service network.

In the first quarter, Mega Financial's offshore banking units (OBUs) and overseas branches contributed 41.4 percent of pre-tax profits at the company's two banking units, International Commercial Bank of China (ICBC, 中國國際商銀) and Chiao Tung Bank (交通銀行).

The banks are set to be merged at a 1:1 ratio on Aug. 21 and renamed Mega International Commercial Bank Co (兆豐國際商銀).

Mega Financial posted unaudited net profits of NT$9.7 billion (US$295 million) in the first half of the year, down 6.16 percent from the previous year.

Tsai said changes in the overall environment, including rising oil prices and slower-than-expected GDP growth, as well as the company's NT$1 billion loss in the credit card business, were the major reasons for the decline in profits.

The firm's bad loan coverage ratio rose to 98.79 percent in the second quarter, while the volume of bad loans increased 10.7 percent quarter-on-quarter to NT$11.17 billion during the same period, the company said.

Tsai estimated that second-half profits would be similar to the first half, and that earnings per share would be ranked in the top five among the nation's 14 financial holding companies.

Mega Financial elected a new board on June 23, with the government taking over seven seats and private shareholders filling the remaining six. As the company is 22.3 percent-owned by the government, its largest shareholder, the board is required to negotiate with the Ministry of Finance and gain its approval on key issues such as mergers, restructuring and important personnel decisions.

Asked whether Mega Financial would increase its stake in state-controlled Taiwan Business Bank (台灣企銀), which is currently at 14.38 percent of shares, Tsai reiterated that this would depend on the government's attitude.