Mon, Oct 02, 2006 - Page 12 News List

Bank takeover may boost stocks

THINGS ARE LOOKING UP Financial stocks appear as if they could stir earlier than predicted following Standard Chartered's acquisition of Hsinchu International bank

By Amber Chung  /  STAFF REPORTER

Financial stocks, which have long been lackluster, are expected to improve on the stock market soon, following the acquisition of Hsinchu International Bank (新竹國際商銀) by foreign rival Standard Chartered Bank, analysts said.

"Originally, we expected the financial plays to revive at the end of the year, driven by a turnaround as the consumer credit abuse storm abates," Fiona Uang (汪姵吟), an analyst who tracks the financial sector at Mega Securities Co (兆豐證券), said in a telephone interview yesterday.

"But now, the mergers and acquisitions [M&As] story is likely to stir the financial stocks at the beginning of this quarter, ahead of our prediction after the surprising news last week," Uang said.

Standard Chartered announced last Friday that it was to acquire a 100 percent stake in Hsinchu International, the 18th biggest out of 43 banks in Taiwan by assets, for US$1.2 billion, or NT$24.5 per share, representing a premium as high as 30 percent versus the local lender's current share price.

The deal marks the first outright buyout of a local bank by a foreign firm in Taiwan's financial sector.

The financial sub-index rose 0.55 percent in comparison with the benchmark index of the local bourse which slid 0.03 percent last Friday.

The nation's financial sector is expected to see a wave of crisis-driven consolidation, as standalone or smaller-scale banks that got into financial difficulties over consumer bad debts have to exit from the market, Fitch Ratings' senior director of financial institutions Jonathan Lee (李信佳) said last week.

Foreign banks are eager to take the opportunity and buy local rivals to beef up their branch networks, HSBC Ltd's head of financial institutions Bruce Chien (簡世鉅) said last month.

The acquisition of Hsinchu International will boost the number of Standard Chartered's outlets in Taiwan to 86, up from a mere three at present.

HSBC itself has been aggressively looking for acquisition targets, reportedly including Far Eastern International Bank (遠東商銀) and Enterprise Bank of Hualien (花蓮企銀).

Investment talks between Citibank and the Bank of Overseas Chinese (華僑銀行) over a NT$6 billion (US$181 million) fund injection and control of a 25 percent stake are rumored to be completed sometime this month.

"Standard Chartered's move would force other foreign banks in Taiwan to expedite their acquisition plans for fear of being left behind in this round of expansion," Uang said.

Financial stocks expected to benefit from the M&As stimulation include Far Eastern International and Ta Chong Bank (大眾銀行) she said.

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