Two banking industry watchers had little good to say yesterday about Tuesday's announced merger between First Commercial Bank (
"The only benefit from the merger of First Commercial Bank and the other two banks is that the scale of the merged bank would be bigger -- but that's it," said Norman Yin (
"The negative side of the merger plan is that the overdue loan ratio of First Commercial Bank will be higher than before," Yin said. "There is no synergy for the three banks so similar [in business format] to combine together."
Huang Tien-ling (
Both experts contend that the merger will do nothing to reduce non-performing loans, indicating the problem would only add up to one big headache.
"Basically, this merger is just a big bank [First Commercial] taking over small problematic banks," Yin said.
"And this means all the financial problems in the two small banks will be transferred to First Commercial from now on. I simply don't see any positive side to the merger."
According to the finance ministry, Pan Asia Bank has the highest overdue loan ratio among the 15 new commercial banks -- 6.98 percent at the end of last year. Dah An Bank had a ratio of 3.04 percent and First Commercial Bank's was 6.37 percent.
Minister of Finance Yen Ching-chang (
"This merger case should be a good example for other banks that have a low market share," Yen said.
"Both Dah An and Pan Asia are listed on the Taiwan Stock Exchange and TAISDAQ. The management of the two banks are willing to give up their decision-making powers and that should inspire other bank executives [to follow suit]."
However, Yen's comment did not address the problem of layoffs.
"Although First Commercial Bank has done well in the international banking sector ... unless they conduct massive layoffs or close branches in the future, I can not see any benefit on the profit side," Yin said.
"The plan by the finance ministry to merge the 12 state-controlled banks also will not generate much benefit [to the sector]. The main problem lies in how the executives conduct their banking business.
"If they are all merged together, but their way of doing banking remains unchanged, the result is the same, except you end up with several bigger banks with the same old problems."
But the finance minister has recently stood by his plan to merge banks, saying that during the merger process "bad apples" in bank management positions would somehow be removed.
Pan Asia Bank has recently been restructured and is currently under new management, Yen said.
Taiwan Ratings Corp changed its outlook on the new mega-bank from "stable" to "negative" yesterday, saying in a statement that "the merger is likely to result in a rise in the bank's impaired assets ratio."
In recent years the government has attempted to liberalize the domestic financial market by permitting a flood of new banks to be set up in Taiwan. For various reasons, many of these "new banks" have remained uncompetitive.
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