Fri, Jun 29, 2012 - Page 13 News List

Chinatrust Financial calls for industry consolidation

LARGER FISH:The financial firm said some of its foreign competitors that were the same size it was just 10 years ago were now much bigger because of acquisitions

By Crystal Hsu  /  Staff reporter

Chinatrust Financial Holding Co (中信金控) yesterday pressed the government to help consolidate the banking industry to boost its competitiveness and pricing ability as intense competition keeps Taiwan’s interest margin the lowest in Asia.

Chinatrust Financial president Daniel Wu (吳一揆) made the statement in reply to media questions over the nation’s overcrowded banking sector, following the entry of a Chinese lender a day earlier.

On Wednesday, the Bank of China (中國銀行) formally opened its branch in Taipei as its president Li Lihui (李禮輝) aims to keep close contact with Taiwanese firms with operations in China.

“Chinatrust Financial is not afraid of competition that exists at home and overseas,” Wu told reporters on the sidelines of the company’s annual shareholders’ meeting.

Compared with Bank of China, foreign competitors like Citibank, Standard Chartered Bank, HSBC and DBS Bank pose a far bigger challenge as they all have the backing of global network and resources, Wu said.

A decade ago, Chinatrust Financial was equal to Standard Chartered Bank in market value, but today, the British banking group is nine times larger than Chinatrust Financial, Wu said. Chinatrust’s market value fell to NT$189.24 billion (US$6.32 billion) yesterday based on its closing price of NT$16.6 on the local bourse.

Wu attributed Standard Chartered’s rapid growth to aggressive acquisitions in the past 10 years. Therefore, Chinatrust Financial will seize on acquisition opportunities to expand its economies of scale and strengthen competitiveness for its core businesses, he said.

“The government should also take note of the industry’s development,” Wu said. “Taiwan’s financial firms must consolidate — be it mergers between state-run or private institutions or both — to be taken seriously on the world stage.”

Because of sharp competition, Taiwan’s interest margin lags behind that in other Asian countries, increasing difficulty for local lenders to turn a profit, Wu said. Looking forward, Wu said he expected the rugged macroeconomic landscape to constrain Chinatrust Financial’s business in the second half of the year.

The financial sector may receive a boost if Taiwan and China sign an investment protection agreement and work out a currency settlement mechanism this year, he said.

The protection pact would encourage more cross-strait investments and demand for lending and other financial services, while a currency settlement would allow banks to expand Chinese yuan services, currently restricted to their offshore banking units for corporate customers, he added.

Chinatrust Financial shareholders agreed to distribute NT$1.28 in dividends per share with NT$0.4 in cash and 8.8 percent of stock dividend on a net income of NT$18.297 billion last year, or NT$1.61 earnings per share.

Shareholders also approved plans to increase its capital from NT$150 billion to NT$180 billion, allowing the company room for future expansions.

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