Cathay Financial Holding Co Ltd’s (國泰金控) overseas buying spree in recent months partially reflects the government’s encouragement of Taiwanese financial institutions’ expansion in Asia, though some domestic players have left the issue cold while focusing on their own core business.
Earlier this month, Cathay Financial announced a plan to acquire a 40 percent stake in Indonesia’s PT Bank Mayapada International Tbk for NT$8.7 billion (US$272 million) through its life insurance arm, Cathay Life Insurance Co (國泰人壽).
It was the third acquisition Cathay Financial announced in two months, indicating the financial holding company is gearing up for overseas deals.
In November last year, Cathay Financial announced the acquisition of US-based investment management services provider Conning Holdings Corp and all of its subsidiaries for US$240 million, followed by the acquisition of a 20 percent stake in the Philippines’ Rizal Commercial Banking Corp for NT$12.55 billion last month.
“Cathay [Financial] is acquiring complementary businesses outside of Taiwan in order to break out of the growth and profitability constraints of the Taiwan market,” HSBC Securities (Taiwan) Co Ltd analysts Bruce Warden and Todd Dunivant said in a research report.
Expanding non-life insurance businesses to offset the very poor underlying profitability of Taiwan’s life insurance sector might be the other major goal of these acquisitions run by the financial holding companies, they added.
HSBC Securities said the financial holding company’s acquisitions in the Philippines and Indonesia are aimed at capturing higher economic and credit growth, in addition to better banking profitability available in Southeast Asia.
However, various market analysts view these acquisitions as relatively small for Cathay Financial in the short term, with the combined deals accounting for just 7 percent of the company’s net book value.
“We view the net impact to Cathay Financial as more of a symbolic gesture on regional expansion, which, ironically, the FSC [Financial Supervisory Commission] is keen on,” UBS Securities Pte Ltd Taipei Branch analyst Kelvin Chu (朱曉暐) said in a research note.
Chu’s view referred to the government’s high expectations for the financial sector’s “Asia League” strategy.
In November last year, FSC Chairman William Tseng (曾銘宗) called on the nation’s major financial institutions to accelerate their expansion in the rest of Asia, for which the commission has been expressing strong encouragement since late 2013.
The commission further encouraged the nation’s 16 listed financial holding companies to report their expansion plans for the next three to five years to the commission, so the government could choose eight financial holding firms as “national delegations,” helping them develop in Asia over the next few years to become potential regional players.
Nearly two months after the commission’s call, Cathay Financial has made several bold steps in the “Asia League” strategy, reflecting its strong appetite for expansion in the rest of Asia, in particular with its increased use of its insurance investment portfolio to gain influence on emerging Asian financial institutions.
Yuanta Financial Holding Co (元大金控), which the commission saw as competitive in expanding its brokerage business in the Asian market, as well as E.Sun Financial Holding Co (玉山金控) and CTBC Financial Holding Co (中信金控), both focusing on banking, have also stepped forward through acquisitions of smaller peers in Indonesia, Cambodia and Japan since last year.
Although Taiwan’s financial institutions have achieved preliminary growth in the Asian market, Tseng hoped for more.
“Some [domestic financial holding companies] have been proactive [in development in Asia], but some others remained stony,” Tseng said at a news conference last week.
Tseng singled out Fubon Financial Holding Co (富邦金控), which is also one of the nation’s top financial holding companies, saying he has yet to see it unveil any significant plans for Asian development.
If some financial holding companies remain passive, Tseng said the government would not help them in the “Asian League” initiative, as the nation would pick up only three to four delegations and give them full support.
However, Fubon Financial seemed to have set its own pace for expansion, with its current focus on the Chinese market.
Fubon Financial’s banking subsidiary in China, Fubon Bank (China) Co Ltd (富邦華一銀行), last month launched its debit card business — the first plastic payment card in China issued by a Taiwanese bank — and will pursue a goal to open five to seven new branches this year.
However, as a cross-strait service trade pact with China remains stalled in the legislature, cross-strait cooperation, deregulation and relaxation in the financial services industry might not make any real progress in the near future, which might make this an appropriate time for Fubon Financial to carefully reconsider its future development roadmap.
In the meantime, the government might continue to push for mergers and acquisitions among state-owned financial institutions, aiming to raise the capital scale of a single player in Taiwan to be a competitive regional player in Asia, in the hope of catching up to the pace of DBS Group Holdings Ltd of Singapore and Malayan Banking Bhd of Malaysia.
TECH PARTNERSHIP: The deal with Arizona-based Amkor would provide TSMC with advanced packing and test capacities, a requirement to serve US customers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is collaborating with Amkor Technology Inc to provide local advanced packaging and test capacities in Arizona to address customer requirements for geographical flexibility in chip manufacturing. As part of the agreement, TSMC, the world’s biggest contract chipmaker, would contract turnkey advanced packaging and test services from Amkor at their planned facility in Peoria, Arizona, a joint statement released yesterday said. TSMC would leverage these services to support its customers, particularly those using TSMC’s advanced wafer fabrication facilities in Phoenix, Arizona, it said. The companies would jointly define the specific packaging technologies, such as TSMC’s Integrated
China’s economic planning agency yesterday outlined details of measures aimed at boosting the economy, but refrained from major spending initiatives. The piecemeal nature of the plans announced yesterday appeared to disappoint investors who were hoping for bolder moves, and the Shanghai Composite Index gave up a 10 percent initial gain as markets reopened after a weeklong holiday to end 4.59 percent higher, while Hong Kong’s Hang Seng Index dived 9.41 percent. Chinese National Development and Reform Commission Chairman Zheng Shanjie (鄭珊潔) said the government would frontload 100 billion yuan (US$14.2 billion) in spending from the government’s budget for next year in addition
Sales RecORD: Hon Hai’s consolidated sales rose by about 20 percent last quarter, while Largan, another Apple supplier, saw quarterly sales increase by 17 percent IPhone assembler Hon Hai Precision Industry Co (鴻海精密) on Saturday reported its highest-ever quarterly sales for the third quarter on the back of solid global demand for artificial intelligence (AI) servers. Hon Hai, also known as Foxconn Technology Group (富士康科技集團) globally, said it posted NT$1.85 trillion (US$57.93 billion) in consolidated sales in the July-to-September quarter, up 19.46 percent from the previous quarter and up 20.15 percent from a year earlier. The figure beat the previous third-quarter high of NT$1.74 trillion recorded in 2022, company data showed. Due to rising demand for AI, Hon Hai said its cloud and networking division enjoyed strong sales
Protectionism: US trade chief Katherine Tai said the hikes would help to counter unfair trade practices from China, while boosting domestic clean energy investments US Trade Representative Katherine Tai (戴琪) defended stiff tariff hikes against countries such as China, saying that paired with investment, they were a “legitimate and constructive” tool for reinvigorating domestic industries. Tai’s comments come a week after sharp tariff increases on Chinese electric vehicles (EVs), EV batteries and solar cells took effect — with levies down the line on other products also recently finalized. The latest moves targeting US$18 billion in Chinese goods come weeks before next month’s US presidential election, with Democrats and Republicans pushing a hard line on China as competition between Washington and Beijing intensifies. In an interview on Thursday
RSS