03.27.2001
CDIB picks up a real CUTI

• China Development and Industrial Bank (CDIB, 2840 'Kai Fa') yesterday announced it will take over management of China United Trust & Investment Co. (CUTI, 2827 'Zhong Lian') on 1 June. CDIB will raise the capital of CUTI by NT$4.0b, pushing it up to the NT$20b required to be classified as an industrial bank.

• CUTI had originally decided to be managed by the banking group composed of First Commercial Bank (2802 'Yi Yin'), Shanghai Commercial & Savings Bank (unlisted) and International Commercial Bank of China (2806 'Zhong Yin').

• CDIB says it is considering the possibility of merging with CUTI in the future. Because CUTI is not an industrial bank, it may need to replace some current employees with staff more experienced in industrial banking. Nine of CUTI's branches will have to close as industrial banks are only permitted to operate 10 branches.

• CDIB is confident it can raise the necessary NT$4.0b. The denial from the Ministry of Finance that it will put a hold on the issuance of industrial bank licenses has cleared CUTI's path to successfully transforming into an industrial bank once capital requirements are met. However, we are concerned that the current weak economic environment may impede CDIB's fund raising activities.

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