Taiwan's Fubon adds voice to push for more China access

Taiwan's Fubon Financial will pursue mutual investment links with Chinese banks as a major part of its growth strategy, adding its weight to a push by the island's financial firms to boost ties with China and break out of a slow, crowded home market.
Fubon's president, Victor Kung, told Reuters in an interview on Tuesday that Fubon is in talks with Chinese financial firms about investing in each other, but expressed concern that unless there is faster change on the regulatory and political front between the Taiwan and China, Taiwan's banks may miss out.
"Cross-strait ties are at a better stage, paving the way for Taiwan banks to make up what they have lost (in China) to global competitors over the past 10 to 15 years," Kung said. "We are worried for sure," he added, when asked if Taiwan's banks might miss out on the China business.
Taiwan's banks, long struggling with a crowded home market and lacking a presence in global markets, posted a 0.59 percent return on assets (ROA) in 2011, the lowest among banks in Asia excluding Japan, according to Fitch Ratings. They have become increasingly vocal of late in their push for better access to China.
A landmark trade deal in 2010 between Taiwan and China, political rivals and one-time military foes, had raised hopes that banks would also be able to get a slice of the mainland market, where they have much less of a presence than other Taiwanese industries such as manufacturers. But progress has been slow because of political sensitivities in Taiwan over allowing investment from China in the financial sector.
In January Taiwan regulators finally allowed Chinese banks to take stakes in Taiwanese banks in the hope that China would reciprocate with better access to its own market. Hopes were further raised when China's Premier Wen Jiabao said this month that China is willing to encourage mutual investments between Chinese and Taiwanese banks.
But the stakes were limited to only 5 percent, which Kung and most other Taiwanese bank executives see as too little to be attractive. "At least 15 percent would be appropriate," said the 56-year-old Kung, a career banker who previously worked at American International Group and Citibank before joining Fubon in 1999. He was named Asia's best CFO in 2004 and 2005 by Institutional Investor magazine. There are increasing signs however that Taiwan's banks will fail to make much progress this year in their attempts to crack the mainland market.
Taiwan's financial regulator has reiterated it would stick to the 5 percent limit for now, and its vice chairwoman told Reuters this month that the negotiation process with China will be difficult as mainland authorities demand more from Taiwan in return.
Top executives of First Financial, Chinatrust and Shin Kong Financial, have all told Reuters recently that they see only slow progress, while Hua Nan Bank, which is looking to buy into a Chinese peer, has noted that this year might be the last chance for progress. "China business will contribute more to bank earnings this year than last year, but it would only be in low single-digits," said Jesse Wang, research head at Nomura in Taipei.
Fubon meanwhile is pursuing mergers at home, where talk of consolidation in the sector has resurfaced in recent months as profitability slips. Taiwan's state-run banks are widely seen as being to first to take part in any consolidation. "Fubon is interested in investing in a local state-run bank. We have to become very strong in home market first, and then we can get a firm foothold on the global stage," Kung said.
Fubon said last week it will expand its local network by acquiring a bank, putting the spotlight on Ta Chong Bank , a controlling stake in which has been put up for sale by private equity firm Carlyle. Buying the Ta Chong stake would boost Fubon's branches in Taiwan to 200 from 126 currently. However Kung said the T$17-T$20 per share price that Carlyle is reportedly seeking was "quite high." Fubon shares closed up 0.89 percent on Tuesday, beating the broader market's 0.78 percent gain.