Thu, Jun 26, 2014 - Page 14 News List

Mega Financial backs mergers of nation’s banks to sharpen competitive edge in Asia

By Kevin Chen  /  Staff reporter

Mega Financial Holding Co (兆豐金控) yesterday presented its assessment report on mergers of state-controlled banks, as financial authorities push for consolidation in the financial sector.

The state-run company, led by chairman McKinney Tsai (蔡友才), gave the presentation to high-ranking officials of the Ministry of Finance and the Financial Supervisory Commission (FSC), the Chinese-language Apple Daily’s Web site reported yesterday.

Minister of Finance Chang Sheng-ford (張盛和) confirmed that a state-run financial institution yesterday made a presentation to him and FSC Chairman William Tseng (曾銘宗) about its potential mergers with other state-run financial firms.

However, Chang did not name the bank, nor elaborate on the details of the presentation, according to the Apple Daily report.

“The bank has used 30 criteria in its assessment,” the news site quoted Chang as saying. “It is a general analysis ... such as which merger is best suited in what ways and which acquisition target is less to its advantage.”

“However, it is not appropriate to disclose the content of the assessment report at this point of time,” Chang said, citing the considerations of market sentiment, company plans and government policy.

“Since potential merger candidates are all listed companies, revelation of such information is likely to affect the stock market... We will reveal the necessary information only if companies’ boards approve their merger plans,” he said.

In February, Chang said First Financial Holding Co (第一金控) or Taiwan Cooperative Financial Holding Co (合作金控) could be potential merger targets for Mega Financial.

Since then, Chang and Tseng have been expressing their views on the potential consolidation of state-controlled banks, as they believe such deals could yield a better chance of becoming a regional player capable of competing with Asian rivals such as Singapore’s DBS Bank and Malaysia’s MayBank.

In April, JPMorgan Securities Ltd said in a report that First Financial or Chang Hwa Commercial Bank (彰化銀行) could be suitable matches for Mega Financial.

“The consolidation, if it happens, could be a long-term positive for the sector to solve the [problem of] overbanking,” JPMorgan Securities analysts led by Jemmy Huang (黃聖翔) said in the report.

The financial industry in Taiwan is one of the most fragmented in Asia, with the five largest local banks accounting for 38 percent of the market, compared with between 50 percent and 80 percent in most Asian markets.

UBS Securities analyst Kelvin Chu (朱曉暐) said in a client note on Monday that the government could be becoming “more constructive” on domestic consolidation of the state-controlled banks. However, with only a few months before the local government level elections in November, Chu said any possibility of industry consolidation is more likely to occur next year.

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