03.12.2001
MoF plans merger of business banks

• The Ministry of Finance (MoF) is planning a merger between Taiwan Business Bank (2834 'Tai Qi Yin') and other business banks, including Medium Business Bank of Tainan (2809 'Nan Qi'), Medium Business Bank of Kaohsiung (2810 'Gao Qi'), Taitung Business Bank (2811 'Dong Qi') and Enterprise Bank of Hualien (unlisted).

• Taiwan Business Bank, one of the seven largest banks, commands a 3% and 4% share, respectively, of the deposits and loans markets. A merger with the four smaller business banks will see these shares increase to 4% and 6%. Branches of the merged entity are well dispersed all over Taiwan with little overlap.

• The MoF views the plan as scale rather than business oriented. It expects the merger will encourage an expansion of small and medium enterprise related services.

• We are concerned over the high non-performing loan (NPL) ratio of the merged entity. Taiwan Business Bank reported a high overdue loan ratio of 7% in January. The merger will lead to a drastic rise in the ratio, further burdening the bank.

WilliamFong@Primasia.com +886-[0]2-2547-8864