Bank SinoPac’s (永豐銀行) plan to sell 20 percent of its shares to China’s Industrial and Commercial Bank of China (ICBC, 中國工商銀行) will allow the lender to use ICBC’s extensive network to serve customers in China and across Southeast Asia, Bank Sino Pac chairman Paul Chiu (邱正雄) said yesterday.
The deal is favorable to Bank SinoPac which is seeking expansions in Greater China and ASEAN markets, but has made limited progress due to its small scale and late start, Chiu said.
“The strategic alliance will enable Bank SinoPac to grow and better serve customers via ICBC’s 17,000 outlets worldwide,” Chiu told a forum on the banking industry’s development and the challenges it faces.
Bank SinoPac and ICBC inked the investment pact in April, but the deal still needs to be confirmed during the next cross-strait trade talks and gain bilateral regulatory approval, Chiu said.
ICBC, the world’s largest bank by market value, has a well-established service network across China and in Southeast Asia where a growing number of Taiwanese companies have set up their businesses, but are under-served, Chiu said.
Bank SinoPac can take advantage of its Chinese partner to reach out to the customers while progressively building up its own network, Chiu said.
“All banks know the importance of ‘following your customers’ when drawing up a development strategy, but this is easier said than done,” Chiu said.
Bank SinoPac is awaiting approval from China to set up its subsidiary in Nanjing and has yet to find suitable targets for acquisition to advance its planned expansions in Southeast Asia.
ICBC, on the other hand, is not as eager to foray into the local market, which is both crowded and fragmented, with the lowest interest spread in Asia, the firm’s chairman said.
Citibank Taiwan chairman Victor Kuan (管國霖) said local peers lag far behind international rivals in tapping the Chinese market and their modest size renders meaningful partnerships with top-tier Chinese banks unlikely.
The gap in bilateral scales explains why Taiwanese banks are seeking second-tier or third-tier Chinese peers as allies instead, Kuan said.
As organic and inorganic expansions require time and money, Kuan suggested Taiwanese banks should seek to exploit emerging opportunities in China and ASEAN nations by offering their financial services and products.
The planned offshore yuan and Formosa bond markets are good ideas, but their success requires more regulatory easing, Kuan said.
E.Sun Commercial Bank (玉山銀行) chairman Gary Tseng (曾國烈) said people in China and Taiwan have different work ethics, although the two sides share the same language and culture.
Banks should bear that in mind, in addition to bracing for a more complicated legal system that involves more layers of government, Tseng said.