Hau Nan Commercial Bank, the banking subsidiary of state-run Hua Nan Financial Holdings Co (華南金控), yesterday inked a cooperation pact with a Chinese peer in an attempt to expand in China by owning shares in a city-level lender.
Hua Nan Bank signed a memorandum of understanding (MOU) in Taipei with Fujian Haixia Bank (福建海峽銀行), the largest city-level lender in Fuzhou, Fujian Province, for operational, business and professional exchanges.
Hua Nan Bank chairman Lin Ming-cheng (林明成) sealed the deal with Fuzhou Vice Mayor Shi Xiaoyu (時小雨), because the city is the largest shareholder in the Chinese bank.
The pact came after a six-month courtship on the part of the state-run lender to secure a Chinese partner after Taiwan and China granted market access to bilateral banks.
After opening a branch in Shenzhen, Guangdong Province, Hua Nan Bank intends to take a stake in a Chinese lender to “deepen its presence in China and better serve Taiwanese customers based there,” Lin told reporters.
To that end, Hua Nan will focus on development in China’s Fujian Province because of its geographic closeness to Taiwan, Lin said.
Fujian Haixia emerged a likely partner given its capital size and sound asset qualities, Lin said.
“The MOU marks a positive beginning to closer ties,” Lin said, adding that Hua Nan plans to take the maximum allowable stake in Fujian Haixia.
With capital of 2.3 billion yuan (US$353.5 million), Fujian Haixia ranks as the 25th-largest among China’s 147 city-level lenders, topping peers in Fujian including Xiamen City Commercial Bank (廈門市商銀), in which Fubon Financial Holding Co (富邦金控) owns almost a 20 percent stake via its Hong Kong unit, according to York Lai (賴明佑), executive vice president of Hua Nan Bank.
Fujian Haixia posted 600 million yuan in net income last year, raising its net worth to 4.5 billion yuan as of this month, Lai said.
“An internal study has yet to make a recommendation,” Lai said. “Hua Nan will then tap a financial consulting firm to help with the matter.”
At present, Taiwanese lenders may seek to expand in China via two of three options — setting up a branch or a subsidiary or taking up stake in a Chinese lender.
The Financial Supervisory Commission is mulling loosening restrictions to help Taiwanese banks compete with foreign rivals in China.
Hua Nan Bank also plans to sign cooperation MOUs with Bank of China (中國銀行) and Bank of Communications (交通銀行) next month and in July, said Derek Chang (張雲鵬), another executive vice president.
Hua Nan Bank is about to complete an assessment on opening a second Chinese branch, likely in Fujian Province, to boost its standing in China, Chang said.