Singapore’s DBS Takes Over Failed Taiwan Bowa Bank

From Reuters, Feb 1 2008

By Faith Hung and Saeed Azhar

TAIPEI/SINGAPORE (Reuters) – Singapore’s DBS Group (DBSM.SI: Quote, Profile, Research) will receive T$44.5 billion (US$1.4 billion) from Taiwan’s government to take over failed Bowa Commercial Bank, the government said on Friday, in the latest acquisition by a foreign bank in the island’s crowded financial sector.

DBS, Southeast Asia’s biggest lender, was picked as the preferred bidder, after a government auction to sell Bowa failed on Thursday.

DBS joined other global banks and private equity investors, including HSBC (HSBA.L: Quote, Profile, Research) (0005.HK: Quote, Profile, Research), Citigroup (C.N: Quote, Profile, Research), Standard Chartered (STAN.L: Quote, Profile, Research) and the Carlyle Group [CYL.UL], to acquire Taiwan banks to expand their presence in Asia’s third-largest wealth management market and fourth-biggest banking market.

“More and more foreign investors are acquiring Taiwan banks, as they are betting China-Taiwan ties will have a breakthrough soon,” said Julian Chen, who manages T$2.55 billion for Invesco Taiwan Ltd, adding that he owns some Taiwan financial stocks.

Taiwan will hold presidential elections in March, with candidates from the ruling and main opposition parties saying they would further relax ties with China — the island’s largest trading partner and favorite investment destination.

CHINA STRATEGY

Taiwan banking stocks, among the worst performers in the region, got a shot in the arm recently on hopes the Taiwan government would lift a ban and allow them to invest in China or open branches there to serve Taiwan clients’ financial needs.

For DBS, the acquisition would bolster efforts to expand beyond its core markets in Singapore and Hong Kong, where it earns 90 percent of its profit.

DBS made unsuccessful attempts to buy banks in China, Taiwan and South Korea in the past few years.

“We intend to fully leverage our extensive footprint in Hong Kong, and our growing presence in China, to intermediate the increasing trade and investment flows between Taiwan, Hong Kong and China,” DBS Chairman Koh Boon Hwee said in a statement.

After the acquisition, DBS will have 43 branches, up from one now, which would help it to compete in the profitable but increasingly competitive wealth management business.

HSBC said in December it would buy The Chinese Bank Co Ltd, receiving T$47.5 billion ($1.5 billion) in Taiwan government funds and making a major cash infusion to rescue the failed Taiwan bank. ([nPEK165267])

DBS’s Singapore shares ended 1.84 percent higher on Friday, topping the broader index’s .FTSTI 0.87 percent gain.