Ta Chong Bank Ltd (大眾銀行) chief executive officer Jerry Chen (陳建平) said he plans to buy a domestic credit union in Taiwan to speed up expansion in wealth management because merger talks with overseas investors have stalled.
The bank have hired UBS AG and may sell as much as US$150 million in shares overseas in July, giving it capital to make acquisitions, Chen said in an interview in Taipei. The company may also raise money by selling a minority stake to a strategic investor, he said.
"Time flies, and the window of opportunity is not always open," Chen said. "If you don't get bigger now, you'll probably lose the opportunity."
Ta Chong is competing with global banks such as Citigroup Inc and HSBC Holdings PLC, which are grabbing a bigger share of a private wealth pool estimated at US$1.2 trillion. Tapping Taiwan's rich tops the wish list of bank chiefs in a market where cut-throat lending and the lowest interest rates outside Japan have pushed 13 of the 42 local banks into the red this year.
The government is renewing a push for mergers among local banks and the more than 300 credit unions, hit by a surge in loan defaults last year that resulted in more than US$3 billion of bad debts.
Citigroup and London-based Standard Chartered PLC, which makes most of its profit in Asia, paid US$1.5 billion for two banks in the past year, the first takeovers by foreign firms.
Hindering the consolidation drive, the biggest shareholders of Taiwanese banks are increasingly reluctant to surrender control as an improving economy and lower credit card defaults bolster their balance sheets.
"The problem is all these major shareholders don't feel they lack money," Chen said. They don't want to give up "unless it's a really attractive price."
Without control, there's little to attract buyers.
Taiwan's banking is fragmented, with 33 foreign companies splitting 9 percent of the market and none of the local banks controlling more than 10 percent. Profit growth is limited by rules that bar domestic lenders from opening branches in China.
"There are too many small banks," said Terry King, who oversees the Taiwanese business for Amsterdam-based ABN Amro Holding NV. "It doesn't make any sense for the big boys coming in."
A government ban on opening new branches in Taiwan makes expansion by acquisition the fastest way to a bigger network to reach more of the island's rich. Foreign banks are also eyeing the more than a million small and medium-sized enterprises, many of which have businesses in China.
Taiwan was the fifth-largest overseas investor in China in 2005, after Hong Kong, Japan, South Korea and the US.
Restrictions on banking and traveling across the Taiwan Strait force Taiwanese companies that invest in China to use Hong Kong as a conduit. That gives foreign banks with a presence in all three markets a competitive edge.
Morris Li (利明献), 50, Citigroup's country head in Taiwan, said the firm's acquisition provides a crucial "third leg" to the company's plans for China.
Citigroup agreed last month to buy Taipei-based Bank of Overseas Chinese (華僑銀行) for NT$14.1 billion (US$426 million). While the takeover will increase New York-based Citigroup's branch network in Taiwan by sixfold to 66, its market share will climb to just 1.5 percent from 1 percent.
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