Cathay Financial Holding Co (國泰金控) yesterday announced that it has secured exclusive rights to negotiate an acquisition of a Malaysia-based bank that would pave the way for further expansion in Southeast Asia.
The agreement, which expires on April 30, would make the company the only prospective suitor competing to acquire the Bank of Nova Scotia Berhad, a Kuala Lumpur-based subsidiary of the Canadian bank, Cathay Financial said in a filing with the Taiwan Stock Exchange.
The company said the acquisition would be jointly funded by its subsidiaries Cathay Life Insurance Co (國泰人壽) and Cathay United Bank (國泰世華銀行), but did not provide further details while regulatory applications and due diligence are in progress.
Cathay Financial said that if the talks proceed smoothly, the acquisition plan will be carried out by Cathay United Bank, making it the first Taiwanese lender to own a subsidiary in Malaysia.
Local media reported that the corporate banking-specialist Bank of Nova Scotia Berhad has more than US$1 billion in assets with a net worth of about US$300 million.
Due to high requirements set by Malaysian financial regulators, acquisition is the fastest route to establish a foothold in the country, analysts have said.
Cathay Union Bank has an offshore currency trading unit in Labuan, a Malaysian federal territory, and successful acquisition of the Canadian subsidiary would bring full access to the country’s ringgit-denominated financial market, analysts said.
While the bank has established footholds in nine out of 10 ASEAN members, including 32 branches in Vietnam and 16 in Cambodia, its presence in Myanmar and Thailand is limited to representative offices.
The conglomerate also holds a 22.7 percent stake in the Philippine’s Rizal Commercial Banking Corp and 40 percent in Indonesia’s Bank Mayapada Internasional Tbk PT.
The pace of Taiwanese banks extending to Malaysia has been slow. In August last year, CTCB Financial Holding Co (中信金控) scuttled plans to acquire Royal Bank of Scotland Group PLC’s (RBS) Malaysian unit due to lagging approval from the Financial Supervisory Commission.
However, on Tuesday, the commission gave its approval for CTBC Financial to acquire a 35.6 percent stake in Thailand’s LH Financial Group PLC in a NT$15.2 billion (US$490 million) deal.
Meanwhile, Cathay Financial reported that net income last month rose 56.74 percent from a year earlier to NT$3.37 billion.
Net income in the first two months of this year was NT$6.94 billion, up 11.2 percent year-on-year, with earnings of NT$0.55 per share.
During the two-month period, contribution from Cathay Life Insurance was NT$1.74 billion, up from NT$580 million during the same period last year.
Gains were driven by stable growth in investment returns, despite a 2.3 percent rise in the strength of the New Taiwan dollar, while Cathay Union Bank posted net income of NT$1.42 billion, Cathay Financial said.
Additional reporting by CNA
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