July 10, 2012 / 8:39 AM / 7 years ago

BASIS POINT-Taiwanese banks expand cross-strait presence

(The following item was previously published by Basis Point, a Thomson Reuters publication)

By Kane Wu and Sandra Tsui

HONG KONG, July 10 (Reuters Basis Point) - Taiwanese banks, Asia’s most active lender group, are expanding their presence across the Taiwan Strait, with two of the island’s major banks opening mainland China branches in the past two weeks and another one on the way.

Bank of Taiwan, Taiwan’s biggest bank by assets in 2011, officially opened its Shanghai branch on Tuesday, following Mega International Commercial Bank’s Suzhou branch opening on June 21. Meanwhile, sources said E Sun Commercial Bank has also obtained approval from the China Banking Regulatory Commission and will likely open a branch next month in Dongguan, Guangdong province.

Previously, Chinatrust Commercial Bank established its first mainland branch in late March. To date, 10 Taiwanese banks have acquired this status, and most of these are now actively engaged in China syndicated loans.

Taiwan Cooperative Bank, Taiwan’s second-biggest bank by assets in 2011, was among the top five mandated arrangers for non-Rmb China loans in the first half of 2012, according to Thomson Reuters LPC. The bank joined as mandated lead arranger and bookrunner on CDB Leasing’s US$300m three-year loan signed in June, which saw six other Taiwanese banks among the 12-bank lender group.

“We have to compete against foreign banks with a long-established China presence,” said Phoebe Li, senior vice president, corporate finance department, at Chinatrust Commercial Bank.

RMB BUSINESS SOON

According to CBRC regulations, China branches of Taiwanese banks are only allowed to start Rmb business in their second year of operation, after making a profit in the first year.

Reuters reported earlier that Hua Nan Commercial Bank Shenzhen branch in May became the first Taiwanese bank to acquire a Rmb licence from the CBRC, while Cathay United Bank, Chang Hwa Commercial Bank, First Commercial Bank, Land Bank of Taiwan and Taiwan Cooperative Bank are expecting licence approvals this year.

“Taiwanese companies in China rely on local financings, which are mainly denominated in Rmb, so Rmb business is very important for us,” a China-based Taiwanese banker said.

“Rmb business is our priority now. This is a calling not only from our headquarters in Taiwan and but also the overall business environment,” another banker said.

However, Taiwanese banks in the first year of holding a Rmb licence can only do Rmb business for companies with direct investment from Taiwan. It is not until the second year that they can extend business ties to all non-Taiwanese firms in the mainland.

And Taiwanese lenders say the client pool with direct Taiwanese links is tiny, restricting their business growth.

MORE TO COME

Currently, Industrial Bank of Taiwan, Taiwan Business Bank and Taipei Fubon Commercial Bank have all set up representative offices in the mainland, waiting to be upgraded to branches after a year of operation.

Bank SinoPac is particularly ambitious, planning to set up a China entity instead of just a China branch. It announced in May that it will apply for corporate capacity of its representative office in Nanjing, Jiangsu province, according to a Reuters report.

Meanwhile, some Taiwanese lenders are already eyeing second mainland branches. Reuters reported earlier this year that Hua Nan (which now has a Shenzhen branch) planned to open a Shanghai branch, while Taiwan Cooperative Bank (which has a Suzhou branch) hoped to open in Tianjin within this year.

“It is a good thing that all our peers have entered into China. Each of us is too small in size, and China is too big for us. We are never short of business opportunities, so we should cooperate more and take bigger clients together,” a China-based banker said.

According to Thomson Reuters LPC data, Taiwanese banks took up a more than 35% lender share of Asia US$ loans, by deal count, in the second quarter of 2012. (Editing by Gavin Stafford and Chris Lewis)

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