05.09.2001
Merger fever spreading: ICBC in talks with Chiao Tung Bank

• International Commercial Bank of China (ICBC, 2806 'Zhong Yin') is holding merger talks with Chiao Tung Bank (2824 'Ziao Yin'), according to insider information from the government.

• The two banks are also looking for another candidate, though it may not be United World Chinese Commercial Bank (UWCCB, 2826 'Shi Hua Yin') as market expectations suggest. UWCCB is a high quality bank and we expect it will merge with other, as yet unknown banks.

• Preliminary information on the merger suggests it will be based on asset quality and the complementary nature of the businesses. We are of the opinion it represents the best merger in terms of operation efficiency and asset quality ever undertaken in Taiwan. No official announcement is expected in May, however.

• Chiao Tung is one of two listed industrial banks in Taiwan. The ICBC merger will allow it to expand its business into consumer banking and the remittance business. However, we advise investors to be wary of the reliability of the information available.

• VB Primasia Investment Opinion: We rate Chiao Tung UNDERVALUED and UWCCB a BUY.

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