to expand in Taiwan in its first major acquisition in seven years. DBS rose 28 cents, or 1.6 percent, to S$17.98 at the 5:05 p.m. close, after gaining as much as 3.2 percent earlier. The Singapore-based company is taking over Bowa Commercial Bank Co.'s assets in exchange for a NT$44.5 billion payment by the Taiwanese regulator.
"This adds to DBS's mainland China strategy to capture small, medium enterprise trade, investment flows and wealth management fees," Citigroup Inc. analyst Robert Kong said in a report yesterday. "We would not expect DBS to enter the saturated mortgage and credit card space."
The acquisition will expand DBS's banking in Taiwan, where it has only one branch in Taipei, and broaden revenue beyond its two biggest markets of Hong Kong and Singapore. DBS will compete with about 40 local banks and more than 30 foreign financial services companies in Taiwan, Asia's fourth-largest banking market.
DBS said the purchase is the first "significant" acquisition since it bought Hong Kong's Dao Heng Bank Group in 2001. The company paid US$5.4 billion for Hong Kong's fourth- largest bank, and hasn't acquired 100 percent stake in any company since.
DBS paid three times book value to add Dao Heng's S$34 billion in assets to its S$113 billion, with some investors saying at the time it overpaid. The stock fell by a record 30 percent in 2001, the year DBS bought Dao Heng.
The Singapore bank's shares have risen 75 percent in the past five years, lagging behind its two local rivals.
United Overseas Bank Ltd. gained 82 percent, while Oversea-Chinese Banking Corp. more than doubled.
With the latest acquisition, DBS said it will get NT$66.3 billion of loans, NT$92.3 billion of deposits, as well as 39 branches.
Taiwan is encouraging mergers and acquisitions in its financial industry by weeding out its weakest banks after the island's consumer banks suffered losses in 2005 and 2006 from surging defaults on credit-card loans. The government took control of Bowa in August.
In Taiwan's bank auctions, the winning bidder receives money from the government to take over assets including branches and at least half of the employees. The winning bidder in government auctions is the company that offers to take over banking assets for the least amount of money.
