Wed, Jul 04, 2007 page12

• Taishin to speed up Chang Hwa merger process

  HURRY The risk of rising losses resulting from the newly adopted personal bankruptcy law serves as an incentive to accelerate the pace of meger activities

  • By Amber Chung / STAFF REPORTER
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  Political uncertainty and likely chances of a drop in asset quality and profitability have forced Taishin Financial Holding Co (台新金控) to accelerate its merger with state-controlled Chang Hwa Bank (彰化銀行), a source told the Taipei Times yesterday.

  "Taishin Financial has to hasten the merger process before the presidential election [next March] while the current government, which has been supportive [of the process], is in power," the source said, on condition of anonymity because he was not authorized to speak for Taishin Financial.

  Another reason was the potential risk of increasing loss stemming from Taishin Financial's huge unsecured lending portfolio following the government's passing of the personal bankruptcy law, which could further dent its profitability and result in more disadvantageous share swap conditions, the source said.

  Shares of Taishin Financial were up 0.82 percent to close at NT$18.35 on the Taiwan Stock Exchange yesterday, while Chang Hwa shares rose 2.14 percent to NT$21.45.

  Taishin Financial, owner of the nation's third biggest credit card issuer, could need to allot an extra NT$12 billion (US$366 million) this year to cover potentially rising bad debts, as the passage of the personal bankruptcy law last month could bring the loss ratio of restructured debts to 70 percent, SinoPac Securities Corp (永豐金證券) estimates showed.

  The financial group has tendered its evaluation report on the share swap to the Ministry of Finance, which controls 15 percent of Chang Hwa. The state bank will initiate the merger process soon after obtaining instructions from the ministry, the source said.

  "We will endeavor to complete the share swap by the end of this year," Taishin Financial chairman Thomas Wu (吳東亮) said on the sidelines of Chang Hwa's chairman handover ceremony yesterday.

  The company will soon call upon financial advisors to evaluate the share swap ratio and handle the conversion of the outstanding 77.5 percent stake in Chang Hwa into Taishin shares, Wu said.

  Taishin Financial will retain dual branding for a while before ultimately integrating into one bank and using a single name, he said, without giving a timeframe.

  Taishin Financial controls 22.5 percent of Chang Hwa and eight of its 15 board seats.

  Former minister of finance Lee Yung-san (李庸三), a Taishin-appointed board member, officially took over the chairmanship of Chang Hwa from acting chairman Wu Cheng-ching (吳澄清) yesterday following the unexpected resignation last month of chairman Chang Po-shin (張伯欣).

  The change in management seemed to signal the hastened merger efforts.

  "Things have dragged on for two years and we hope to move faster," Lee said.

  The bank could discuss the hiring of financial advisors during the board meeting this month, he said.

  "Taishin Financial-appointed board directors are not subject to the rules on conflict of interest and are therefore allowed to join the talks -- even on the share swap ratio," Lee said, citing regulations of the Business Mergers and Acquisitions Law (企業併購法).

  Lee, who has 20 years of experiences in finance, has taught many high-profile financial officials, including Financial Supervisory Commission Vice Chairperson Susan Chang (張秀蓮).
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