Taishin International Bank (台新銀行), Taiwan's second-largest credit card issuer, plans to offer shares to take over rival Dah An Commercial Bank (大安銀行) for a planned financial holding company.
The banks said in a statement yesterday that Taishin will offer as much as 785 million shares for Dah An's 1.57 billion outstanding shares, valuing the bid at NT$10.4 billion (US$301 million), based on Taishin's share price of NT$13.25.
One share in Taishin Bank will be exchanged for two to 2.5 shares in Dah An Bank and the merger is expected to be completed in the first quarter of next year, the statement said. The share-swap ratio is awaiting shareholders' approval, it said.
"Bank mergers are inevitable in Taiwan's over-banked financial industry," said Lin Tsui-pin (林翠萍), who manages Prudential Securities Investment Trust Co's (保誠投信) NT$400 million Financial Fund.
The proposed Taishin Financial Holding Co (
Taiwan's government wants financial companies to merge to increase efficiency and reduce the ratio of bad loans to assets.
Few banks have yet agreed to do so. In July, nine-year-old Dah An pulled out of a government-initiated three-way merger with First Commercial Bank (
The Legislative Yuan passed laws in June allowing the establishment of holding companies that can acquire lenders, securities companies, insurers and fund managers.
Minister of Finance Yen Ching-chang (
Yen made the remarks yesterday after Taishin announced it will merge with Dah An to form a financial holding company, when the ministry starts taking applications on Nov 1.
Financial holding companies will enter a second stage of consolidation within the next two years, Yen said.
Taiwan banks need to clean up bad loans as they embark on government-led mergers to create fewer, stronger banking groups in an island home to more than 300 lenders.
As much as NT$1.42 trillion, or 9.9 percent of bank loans were bad or may turn bad, the Central Bank of China said in August. The government says about one in every eight loans are bad, a figure analysts say underestimates the situation by half.
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