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April 29, 2017

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MOF and FSC to approve new merger candidates

TAIPEI, Taiwan -- Following Mega Holdings (兆豐金控), First Financial Holding Co. (First Holding,第一金控) is set to name ideal candidates for merger to authorities some time next week.

The move of both First Holding and Mega Holdings is allotted by financial regulators including the Ministry of Finance (MOF) and the Financial Supervisory Commission (FSC), which are endeavoring to push for the consolidation of the local banking industry.

The United Daily News reported that Finance Minister Chang Sheng-ford (張盛和) and FSC Chairman Tseng Ming-chung (曾銘宗) were briefed on the merger evaluation of Mega Holdings by the company's Chairman McKinney Tsai (蔡友才)

The finance minister recently told the United Daily News that instead of specifying the best peer for merger, Tsai made a comparison list of state-invested financial institutions by a run of standards including number of branches, merger costs, consolidated earnings per share as well as return on equity and return on assets.

Hua Nan Sits Atop Table

Chang revealed that those banks sitting atop Tsai's evaluation chart were First Holding, Hua Nan Financial Holdings Co. (華南金控) and Taiwan Cooperative Financial Holdings (合庫金控). McKinney Tsai's evaluation report named life insurance, consumer finance and asset management as the missing pieces of Mega Holdings' product mix.

First Holding will also release its merger evaluation reports to Chang and Tseng some time this week. Chang said that both the MOF and FSC will further make sense of both evaluation reports and brainstorm to come out with the best solution.

Chang added that due to the overall administrative procedure, it will be at least one year before the exemplary " match-making" assigned by the government come to pass.

Tseng Ming-chung has actively called for the consolidation of Taiwan's financial services industry. He recently reiterated hopes for helping one or two local banks grow into a regional player within three to five years through consolidation.

For years, Taiwanese banks have been under fire for their poor profitability given that they suffer from razor-thin net interest margins. Most bankers say the problem is clear: too many banks bid for too little business.

Despite not the panacea the market needs, consolidation and transformation in the sector is unavoidable. Mergers within the private and public sectors are the most likely way to achieve this, with cross-sector mergers only likely to come later, according to Tseng.

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