Taiwanese government to rescue the Chinese Bank, a financial
institution that has been managed by Taiwan’s bad debt agency since
January 2007 after a run on deposits.
The payout by the government’s Central
Deposit Insurance Corporation is being supplemented by a $300
million to $400 million injection of HSBC’s own capital to shore up
the balance sheet.
The Chinese Bank provides banking services
for retail customers, SMEs and large corporates. The deal will
increase HSBC’s branches in Taiwan from eight to 47 and add 1
million customers to its existing franchise in Asia’s
fourth-biggest banking market. It will also enhance HSBC’s direct
banking service, which it launched in Taiwan in 2006.
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As at 30 September 2007, the gross asset value of the Chinese Bank
was TWD$100.16 billion ($3.08 billion).
Over-banked Taiwanese market
The deal is the latest in a series of acquisitions of Taiwanese
banks by foreign players, as the government continues to encourage
consolidation in an over-banked market. Standard Chartered and Citi
have also moved in since a credit crunch hit the banking sector for
$4.93 billion in bad loans in 2006.
And although it is not unprecedented for the Taipei administration
to offer an incentive to take over a bank – ABN AMRO was given a
TWD6.9 billion subsidy to take over Taitung Business Bank in June
2007 – the value of the deal is the highest so far.
A Standard Chartered spokesman told RBI the bank would not
comment on whether government intervention was creating an uneven
playing field in the country. He said: “It’s not a suggestion which
has been put to us before and we don’t comment on other company’s
deals. We are very pleased with our acquisition of Hsinchu
International Bank in Taiwan and we are happy with the position in
Taiwan.”
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By GlobalDataEstablishing a presence in Taiwan is seen by international banks as
a strategic way of gaining access to the rapidly growing Chinese
market, which still has tough legislation preventing foreign
companies moving in on a large scale. Some 4.7 million people
travel between Taiwan and China each year and the percentage of
Taiwanese exports that went to China increased from 4 percent in
2000 to 23 percent in 2006.
Positioning for the future
HSBC’s acquisition of the Chinese Bank is consistent
with the ‘position for future’ strategy it has outlined for
countries in which it has a relatively low market share and is
prevented from expanding because of regulatory issues (see RBI
583). It has the same approach in India and Vietnam.
The deal is also in line with the group’s aim to generate 60
percent of its profit from emerging markets by 2010.
Vincent Cheng, chairman of HSBC in Hong Kong, said: “Taiwan is a
key component of HSBC’s Greater China positioning. Over 750,000
Taiwanese companies currently operate in China and there was $7.6
billion of foreign direct investment from Taiwan in 2006, up over
180 per cent year-on-year.
“Together with our market-leading franchise in Hong Kong and
position as the largest foreign bank in China, HSBC is strongly
positioned to benefit from the growing level of trade and
investment in Greater China and across the region.”
In September, HSBC also entered the Taiwanese insurance sector with
a greenfield insurance business. It will compete with foreign
players such as ING, Aviva and Prudential as well as domestic
insurance leaders Cathay and Shin Kong (see RBI
581).
