Mega not dumping Taiwan Business

Mega Financial Holding Co (兆豐金控) said it has no plans to sell off its stake in Taiwan Business Bank (台灣企銀). However, it has temporarily shelved plans to take over its smaller rival owing to concerns over the latter's bad loans that could mar its own financial profile, sources close to Mega Financial's top management said.

"It is impossible for us to ignore the Ministry of Finance's directive and unilaterally dump shares in Taiwan Business," an executive at the state-controlled Mega Financial said on condition of anonymity in a phone interview yesterday.

The company official's response came in the wake of the Chinese-language Commercial Times' report yesterday that Mega Financial could offload its 14.38 percent stake in Taiwan Business Bank to overseas private equity funds or other potential strategic investors.

However, the executive said Mega Financial has put its investment on hold out of concern that Taiwan Business' NT$15 billion (US$458 million) in bad debts would dent the financial group's profitability if it continues its investment plan.

Given that both parties have established outlets in Australia, Mega Financial is required to obtain the Australian financial regulator's approval before boosting its shareholding in the state-run Taiwan Business to more than 15 percent, the company executive said.

In addition, Mega Financial is concerned about Taiwan Business' bureaucratic and stiff management, the executive said.

The source added that the company might participate in Taiwan Business' planned recapitalization of NT$10 billion in October, if asked by the Ministry of Finance, but only on the condition that Taiwan Business write off a large part of its massive bad debt.

"We have a responsibility to our own shareholders and cannot allow the investment to affect our financial standing," he said.

Mega Financial, the nation's third-largest financial group by assets, said last December that it planned to invest up to NT$10 billion to purchase up to 26 percent of Taiwan Business' shareholding within one year.

The investment plan was part of the government's second-stage financial reform, which had set a target of reducing the number of state-run banks to six by the end of last year to consolidate the nation's banking sector.

The Ministry of Finance yesterday reiterated that there had been no change in Mega Financial's plan to raise its shareholding in Taiwan Business.

"The policy remains un-changed," said Liu Teng-cheng (劉燈城), director general of the ministry's National Treasury Agency.

But the ministry said it would take into account various factors and opinions from the two companies' management before deciding how Mega Financial would respond to Taiwan Business' recapitalization plan in October.

Additional reporting by Jackie Lin