The Central Deposit Insurance Corp (CDIC) yesterday emptied its pockets to dispose of The Chinese Bank (
"In negotiations, the HSBC agreed to take over The Chinese Bank's assets, liabilities and operations [in return for a] payment of NT$47.488 billion [from the government's financial restructuring fund]," a CDIC press release said.
The parties are expected to sign a contract on Wednesday, the release said.
HSBC's asking price was within 10 percent of the amount offered by the CDIC, president Johnson Chen (
After the acquisition, HSBC's network of branches will increase from eight to 47.
"The Chinese Bank will provide HSBC in Taiwan with significant opportunities in retail, commercial and corporate banking, while we believe HSBC's international network, global expertise and financial strength will benefit our new customers and employees," HSBC Taiwan CEO Alistaire Currie said.
The acquisition also signifies HSBC's commitment to the nation, as "Taiwan is a key component of HSBC's Greater China positioning," HSBC chairman Vincent Cheng (鄭海泉) said in the same statement.
More than 750,000 Taiwanese companies operate in China, with Taiwanese direct investment in China totaling US$7.6 billion last year -- an increase of 180 percent from a year earlier -- Cheng said.
He said HSBC, a leader in Hong Kong and the largest foreign bank in China, was strongly positioned to benefit from the region's growing trade and investment.
To complete the deal, HSBC is required to establish a local subsidiary with a minimum capitalization of NT$10 billion in three years, or within one year of HSBC's total assets in Taiwan exceeding NT$450 billion, whichever comes first, the HSBC statement said.
As of late October, The Chinese Bank had a net worth of negative NT$29 billion. However, Chen said yesterday that the troubled lender's losses had worsened.
The bank now had debts of NT$130 billion, compared with only NT$90 billion in assets, he said.
The government's financial restructuring fund will have only NT$30 billion left in the coffers after another NT$12.9 billion is paid to Cathay United Bank (國泰世華銀行), which agreed to purchase debt-ridden China United Trust and Investment Crop (CUTIC, 中聯信託) in October.
Under such circumstances, the CDIC may have to borrow as much as NT$18 billion from the central bank and domestic banks to pay for the HSBC deal, Chen said. He said interest rates for any loans had not been decided.
However, Chen said the CDIC expected to recoup some cash by liquidating The Chinese Bank's NT$20 billion holdings in consumer banking and NT$10 billion corporate banking businesses.
Chen said the agency would reserve enough capital to dispose of debt-ridden Bowa Bank (寶華銀行) in an auction set for Jan. 31.
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