The acquisition of The Chinese Bank (中華銀行) is expected to raise HSBC Holdings Plc's local market share from 1.2 percent to 1.6 percent, Citigroup analysts Bradford Ti (鄭溫煌) and Janet Lu said in a note to investors yesterday.
The analysts' remark came after HSBC won a government auction to take over the financially troubled lender in return for a subsidy of NT$47.488 billion from the Central Deposit Insurance Corp.
The deal is also likely to cost the London-based bank NT$8 billion in total, or NT$204 million per branch, the Citigroup analysts estimated, after taking into account the government subsidy, The Chinese Bank's negative book value of NT$30 billion and an estimated US$300 million to US$400 million capital injection by HSBC.
The Citigroup analysts said their rival's latest acquisition was proof of the sector's "long-term attractiveness" and "could introduce a more rational competitive environment" in Taiwan.
In June, ABN Amro Bank won an auction to acquire Taitung Business Bank (台東企銀), boosting its number of local branches from five to 37. In April, Citibank announced it would take over the Bank of the Overseas Chinese (華僑銀行), expanding its local network to 66 branches. In October last year, Standard Chartered Bank absorbed Hsinchu International Bank (新竹國際商銀), boosting its a nationwide network to 86 branches.
"However, we anticipate it also raises the level of competition within an already fragmented space, especially in wealth management -- which has been a growth area for banks over recent years," the analysts said.
As so many foreign banks have now acquired local lenders, the analysts said domestic players could emerge as the driving force behind future consolidation.
“While consolidation in Taiwan has moved at a frustrating pace, we are hopeful that improved politics post Legislative Yuan and presidential elections next year could usher in a better reform environment for the banks,” they said.
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