FSC expects to see more bank buyouts

"Taiwan is now the market that intrigues foreign rivals the most in Asia in comparison with neighbors like Japan and South Korea, where there are not many targets left."

Gary Tseng, Banking Bureau director-general

Taiwan is the most attractive Asian financial market for foreign investors looking for takeover targets, as the consumer credit-abuse storm has weakened local banks' financials, a Financial Supervisory Commission (FSC) official said yesterday.

"Taiwan is now the market that intrigues foreign rivals the most in Asia in comparison with neighbors like Japan and South Korea, where there are not many targets left as consolidation is almost complete," Banking Bureau Director-General Gary Tseng (曾國烈) said on the sidelines of the Asian Bankers Association meeting in Taipei.

Tseng said that foreign banks could strengthen their distribution networks for consumer banking in Taiwan through acquisitions.

Standard Chartered Bank's announcement last week that it was buying Hsinchu International Bank (新竹國際商銀) rocked the local financial market and analysts expect the deal to spur other foreign banks to invest here.

The Chinese-language Commercial Times reported yesterday that HSBC Ltd tried to outbid Citibank by offering NT$15 per share for the Bank of Overseas Chinese (華僑銀行). Citibank reportedly offered NT$12 to NT$13 per share, while Standard Chartered offered NT$16 per share, the paper said.

The Bank of Overseas Chinese said the report about the HSBC and Standard Chartered offer prices was inaccurate. In a filing sent to the Taiwan Stock Exchange, it said it was in talks with several local and foreign investors but had not decided on prices.

The FSC is planning to give buyers of problematic banks preference in adding branches into the greater Taipei and Kaohsiung areas, Tseng said.

"We can be very flexible in this matter," he said.

Regulations allow a bank to apply to move one branch into Taipei or Kaohsiung a year, he said.

The number of "problematic" lenders could also be broadened to include those blacklisted by the government restructuring fund to troubled banks in the early stage of difficulty, such as having a capital adequacy ratio that falls below the required 8 percent, Tseng said.

In a report released yesterday, Macquarie Securities said that the surprisingly high premium for Hsinchu International is likely to fuel a speculative rally for smaller banks.

Far Eastern International Bank (遠東國際商銀) could be the most likely target, while the Bank of Kaohsiung, Bank of Overseas Chinese and Cosmos Bank (萬泰銀行) might see more speculation, the report said.

Debt-ridden Taitung Business Bank (台東企銀) and Enterprise Bank of Hualien (花蓮企銀) could be the next to be bought by foreign investors.

A large-scale financial institution is doing second round of due diligence of Taitung Business, whose self-bailout originally expired at last month's end, Tseng said, indicating the FSC would extent the given deadline.

IT is waiting for Enterprise Bank of Hualien to submit the list of its buyers before deciding whether to approve the bank's plan to raise NT$9.1 billion, he said.