Why Taiwan's Chinatrust didn't expand
By ALLEN T.CHENG Taipei
It has long been among Taiwan's most profitable banks. Chinatrust
Commercial Bank made $150 million last year as its loan portfolio
expanded 11.7% in local-currency terms to $12.7 billion. It is not
the island's largest its $19.8 billion in assets pales beside
state-owned Bank of Taiwan's $64.2 billlion but Chinatrust
has been consistently profitable even during the Asian Crisis. It
launched a regional expansion drive in 1995, opening branches across
Asia and acquiring tiny Bank of Tamara in Indonesia and Access Banking
Corp. in the Philippines the next year. So when the 1997 turmoil shook
up many of the region's banks, analysts expected cash-rich Chinatrust
to jump at the opportunity to buy more foreign assets.
It didn't. Chinatrust did look at Thai Military Bank, Philippine National
Bank and Chase Manhattan's Hong Kong operation. In the end, though,
Chinatrust officials concluded they could put the $1 billion or so
needed for a takeover to better use. "We decided we weren't large
enough to swallow them," says executive vice president and chief financial
officer Jason Wang. "Banks in Taiwan aren't big enough to buy large
players regionally. We would need to pay up to 100% of our equity
to make such acquisitions. We can't possibly put all of our eggs in
Some fault the Taiwan bank for being too conservative. But Christine
Wu, a banking analyst with Yuanta Securities in Taipei, says Chinatrust
does not have the expertise for a big Asian push. She praises its
decision to focus instead on the Internet and China. The bank has
transformed itself into a clicks-and-mortar operation all its
clients, whether in Taiwan or overseas, can access their accounts
online. Chinatrust has also invested heavily in securities trading.
These new capabilities, says Wang, will propel profits to $323 million
China is the bank's holy grail. "We're very excited about the mainland,"
says Wang. "We believe we have the ability to manage in this market.
There is no language barrier and simplified Chinese characters are
easy to learn." Chinatrust hopes to open representative offices and,
later, branches in Shanghai and Guangzhou. Its executives will join
a group of bankers scheduled to visit the mainland this month. "But
we want to make sure we comply with the [Taiwan] government's policies,"
says Wang. "The most important thing is our government's attitude.
It must be reciprocal. Mainland banks must also be able to open in
He concedes that Chinatrust is "still only a significant community
bank for Chinese." It plans to compete in non-Chinese markets too,
with partners it can trust. (Wang declines to comment on rumors the
bank is buying a significant stake in Manila's Equitable PCIBank.)
The executive vice president says it will take Chinatrust five years
before it can be compared with Singapore's DBS Bank, which has been
more aggressive with its regional ambitions. "We aim to be like [Hong
Kong and British global bank] HSBC too, but it cannot be achieved
in just five or six years," he adds. Especially since Chinatrust has
yet to take the first real step.
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