Taiwan Merges Two State-owned Banks

UNCLAS TAIPEI 000336 SIPDIS SIPDIS STATE PLEASE PASS USTR STATE FOR EAP/RSP/TC, EAP/EP USTR FOR ALTBACH AND STRATFORD USDOC FOR 3132/USFCS/OIO/EAP/WZARIT TREASURY FOR OASIA/LMOGHTADER TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF GOVERNORS, SAN FRANCISCO FRB/TERESA CURRAN, AND NEW YORK FRB/MARA BOLIS E.O. 12958: N/A TAGS: EINV EFIN ECON PINR TW SUBJECT: Taiwan Merges Two State-owned Banks SUMMARY -------------- ¶1. Two state-owned enterprises, including the largest bank in Taiwan, will merge in July 2007. The new entity will be Taiwan's largest financial holding company and its banking unit will have over 10% market share. END SUMMARY. Two State-owned Enterprises -------------- ¶2. Taiwan's Ministry of Finance (MOF) recently announced that Central Trust of China (CTC) will merge into Bank of Taiwan (BOT) in July 2007. Taiwan's Fair Trade Commission approved the merger plan in May 2006 and banking authorities granted permission in December ¶2006. In early January 2007, the Securities and Futures Bureau authorized BOT to issue new shares to replace CTC shares at a ratio of one BOT share for two CTC shares. ¶3. Currently, BOT is the largest bank in Taiwan. It has market share of 9% in assets, 9% in deposits, and 8.5% in outstanding loans. CTC ranks 36th in net worth and 26th in assets among Taiwan's 42 banks. However, CTC is a giant in insurance. CTC is the primary insurance provider for all Taiwan military personnel, public school faculties, and civil service employees. It also conducts procurement for public agencies. Changes after Merger -------------- ¶4. After the merger, the new banking unit will remain the largest bank in Taiwan, with market share of over 10%, total assets of NT$2.93 trillion (US$88.8 billion),deposits of NT$2.29 trillion (US$69.4 billion),and outstanding loans of NT$1.67 trillion (US$50.6 billion). ¶5. According to the MOF, BOT will transform itself into a financial holding company (FHC) after the merger. CTC's non-banking departments will be reorganized as independent companies affiliated with the new FHC. With the largest bank, the only insurance provider to public employees, and the major public procurement contractor, the new FHC will surpass Cathay as the largest one in Taiwan. YOUNG