Chinatrust prevails at auction

Chinatrust Commercial Bank (中國信託商銀) yesterday outbid four counterparts in a government-held auction to acquire the debt-ridden Enterprise Bank of Hualien (花蓮企銀).

The auction was held at 2pm yesterday and attracted five financial institutions to make bids for the bank, which owns 31 branches nationwide, the Central Deposit Insurance Corp (CDIC, 中央存保) said.

Chinatrust offered the lowest bid of NT$4.49 billion (US$136 million), the amount the government's financial restructuring fund needs to pay out to the winning bidder to help absorb the Hualien lender, including its bad loans.

The names of the other four bidders were not disclosed.

Chinatrust's tender was lower than the government's floor price, which was kept confidential, the Financial Supervisory Commission (FSC) said.

The deal is scheduled to be inked on Tuesday and transactions will be closed on Sept. 8.

"We're satisfied with the smooth auction as it was completed in the first round and saves money for the state coffers," FSC spokesperson Susan Chang (張秀蓮) said yesterday.

In a press statement issued in the evening, Chinatrust, the nation's largest credit-card issuer, said acquiring the small lender would help it extend its branch network to 142 nationwide and facilitate its efforts to launch more diverse financial services.

The CDIC's bidding conditions stipulate that Chinatrust would be allowed to move 16 branches of Enterprise Bank of Hualien within the next five years without any geographical restrictions.

The remaining 15 branches can be relocated within the original cities or counties, including four that will remain in Hualien to serve local customers, Chinatrust said.

This was the third time Chinatrust had merged local lenders.

It acquired Grand Commercial Bank (萬通銀行) in 2003 and Fengshan Credit Cooperative (鳳山信合社) in 2004, strengthening its distribution network and improving the market position of its banking business.

The Hualien bank was taken over by CDIC in early January. Statistics released by the FSC at the time showed that the bank had been experiencing monthly losses of up to NT$40 million, on top of a net worth reaching NT$7.78 billion in the red and a bad loan ratio of 29.77 percent as of the end of November.

The government will soon auction off the ailing Taitung Business Bank (台東企銀) and The Chinese Bank (中華銀行).

Bids for Taitung Bank would close next Friday and for The Chinese Bank at the end of next month, CDIC president Johnson Chen (陳戰勝) said yesterday.

China United Trust and Investment Corp (中聯信託), which was taken over by CDIC at the end of March, is in the process of being evaluated and will be put in the next round of auctions.

As for another poorly performing lender, Bowa Bank (寶華銀行), the FSC said yesterday that potential investors interested in its fundraising plans had submitted relevant documents to the commission for review.

"Bowa is working hard and we'll give the lender some flexibility," Chang said.

Bowa was initially required by the government to raise NT$4 billion by yesterday, or face the fate of being taken over.

The lender's asset quality quickly deteriorated with its net worth shrinking to NT$41 million last month, down from NT$973 million in March, with unamortized losses totalling NT$25 billion, commission data released on Tuesday showed.

Bowa deposits fell by nearly NT$3 billion to NT$129 billion in the past month, the data showed, but the bank has no imminent liquidity risk, Chang said.