Thu, Dec 30, 1999 page17

• 3-in-1 state bank tie-up announced

  CONSOLIDATION After weeks of hints and market speculation, the Ministry of Finance officially announced a merger of state-owned banks

  • By Shirley Sun / STAFF REPORTER
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  It's official: state-owned Bank of Taiwan (臺灣銀行), Land Bank of Taiwan (土地銀行) and Central Trust of China (中央信托局) will merge, the Ministry of Finance (財政部), the Central Bank of Taiwan (央行) and the three banks said yesterday in a joint announcement.

  "In order to better prepare Taiwan for WTO entry, to improve Taiwan's international competitiveness in the financial world and to follow the trend of larger banking," said Minister of Finance Paul Chiu (邱正雄), "we've decided to push forward the merger" of the three banks.

  In addition, Chiu said, the finance ministry, the Central Bank and three banks will establish a taskforce to work out a detailed merger plan. The taskforce will decide the new company's structure, employee benefits and business opportunities, and the committee's work will be unveiled in roughly six months.

  However, "The new company will not be allowed to list on the stock market immediately," Chiu added.

  According to the ministry, there are three major reasons why the merger makes sense.

  First, the three banks are all state-owned, and thus there will be no problem with the exchange of stocks. Second, by combining the three banks into one, overlapping costs can be reduced and savings achieved.

  Finally, with Taiwan's WTO entry, foreign financial institutions will invade the domestic market, and the three-into-one merger will help increase the competitiveness of local banks.

  After the merger, the new entity's equity value will be an estimated NT$3.73 trillion (US$117.98 billion), according to October figures. Based numbers supplied by the July issue of The Banker, an industry trade magazine, the bank will be the 75th-largest internationally.

  Currently, Bank of Taiwan ranks No. 123, Lank Bank ranks No. 175, and Central Trust ranks No. 508.

  The merged bank will also command 21.6 percent of the market's deposit savings and 18 percent of the loan market.

  The ministry had long promised to unveil a bank merger before the end of this year, as it has been prodding private-sector players in the overcrowded finance industry to consolidate.

  "The first private sector bank merger will be ready by mid-year," Chiu said. "The merger should set an example to encourage more private financial institutions to merge."

  Chiu said the three state-owned banks specialized in different businesses. "After the merger, the new entity will establish a sub-company managing insurance, security and land development," he said.

  Perng Fai-nan (彭淮南), central bank governor, said results of the merger would include more diversified risks, increased return on equity and higher return on assets.

  At present, Bank of Taiwan and Land Bank both have large amounts of real estate, while Central Trust of China provides long-term funding for state development and specializes in the selling and buying of gold and insurance.

  "Soon private banks will be allowed to follow the same example to conduct cross-industry business," Chiu added.

  As far as employees are concerned, "We won't lay off 4,000 employees as one local newspaper has printed," Chiu vowed. "The three banks were going to hire more people; now there maybe less new people hired."

  There are roughly 14,300 employees at the three banks.

  "With additional manpower [resulting from the merger], bank employees can have additional time to receive further professional training," Chiu said.
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