10.22.2001
Chiao Tung to establish FHC

• Local press reports Chiao Tung Bank (CTB) has decided to set up a financial holding company (FHC). An EGM is slated for next month. On our last company visit, CTB indicated it would target securities and insurance companies for merger. As of late, press suggests CTB has allied with a mid-size local unlisted securities company, but mgt. denies the story. We believe there are a number of FHCs operating in Taiwan with similar structures already completed. We believe a merger with another commercial bank is necessary for CTB to strengthen its loan book. In the short run, we remain concerned over investment income of the bank, which has prompted our earnings downgrade.