Thu, Nov 08, 2018 - Page 12 News List

Government backs state financial firm M&As

By Kao Shih-ching  /  Staff reporter

The government encourages mergers and acquisitions (M&A) among state-run financial institutions aiming to increase their profits, but it has no plans to ease financial regulations, Minister of Finance Su Jain-rong (蘇建榮) and the Financial Supervisory Commission (FSC) Chairman Wellington Koo (顧立雄) said yesterday.

“Private financial holding companies have demonstrated stronger asset growth rates than their public peers,” Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗) said at a question-and-answer session at a meeting of the Legislative Yuan’s Finance Committee.

While state-owned Taiwan Financial Holding Co (台灣金控) ranked second in terms of assets in 2009, only trailing after Cathay Financial Holding Co (國泰金控), it dropped to fourth place last year, outclassed by Cathay Financial, Fubon Financial Holding Co (富邦金控) and CTBC Financial Holding Co (中信金控), Tseng said.

From 2009 to last year, Taiwan Financial increased its assets by 28.59 percent to NT$5.27 trillion, lagging far behind Cathay Financial, who saw its assets jump 105.83 percent to NT$8.84 trillion during the same period, Tseng said, citing FSC data.

Private financial holding firms also performed better in terms of net profit, Tseng added.

Su said private financial holding firms relied on a “second profit engine other than banking” — their insurance subsidiaries — to expand their profits.

Most of their public-sector counterparts do not have insurance businesses, Su said, adding that he hoped they would improve their earnings by diversifying their operations.

Some state-run financial institutions still need to support national policy and profit is not their priority, the minister added.

The ministry would not promote M&As among state-run financial institutions, but will encourage them to “proactively evaluate the possibility” if they could help increase their profitability, he said.

Koo, who in June announced plans to ease M&A rules for private financial institutions, said the commission supports Su’s decision.

However, while restrictions on hostile and friendly takeovers among private financial institutions could be eased, it is more practical to reach a friendly takeover among state-run financial firms.

Democratic Progressive Party Legislator Julian Kuo (郭正亮) disagreed.

“It is impossible to reach a friendly takeover since no state-owned institution likes to be merged,” Kuo said, adding that the government would have to offer companies more incentives.

Under the commission’s proposal, a buyer in an M&A of private financial companies would only have to commit to purchasing a 10 percent stake — down from the current 25 percent — in the target company to initiate a tender offer.

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