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The Home-Alone Bank: Why Taiwan's Chinatrust didn't expand


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The Home-Alone Bank
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 one basket."

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 this year.

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 Taiwan too."

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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