Ministry of Finance
Taiwan Financial Services Conference
Investor Presentation
March 2005
ACHIEVEMENTS IN THE BANKING SECTOR
1
Decrease in Total Number of Banks
53
2
Reduction in System NPL Ratio1
11.3%
52
8.9%
50
6.1%
49
2001
2002
2003
3
4.5%
3Q2004
2001
2002
2003
3Q2004
Increase in Profitability (Pre-tax ROAE)
9.7%
6.5%
5.5%
(5.1)%
2001
2002
2003
3Q2004
1. Broad-based NPL consistent with international NPL definition
2
TAIWAN BANKING MARKET RANKS THIRD IN ASIA
(excluding Japan)
2003 Total Banking System Assets (US$ bn)
3,290
China
832
Hong Kong
Taiwan
743
South Korea
739
373
India
Malaysia
215
Singapore
213
172
Thailand
Indonesia
Philippines
126
66
3
BANKING SECTOR: IMPROVEMENT & RECOVERY
Total Loan Assets*
Banking Sector NPL Ratio**
USD billion
(%)
460
430
403
421
414
11.30
434
358
8.90
6.10
4.40
1998 1999 2000 01
02
03
04***
4.88
5.34
1998 1999 2000 01
4.50
02
03
04***
* Based on exchange rate of US$1=NT$33
** Domestic banks only
*** First 9 months; before 2001 NPL ratio is in narrow base – not include surveillance loans
Source: Bureau of Monetary Affairs, Central Bank
4
BANKS IN TAIWAN
Wholly Government
Owned (4)
1. Bank of Taiwan
Government Affiliated (9)
20%≤Gov’t Ownership <100%:
2. Central Trust
1. Bank of Kaohsiung
3. Export-Import Bank
2. Chang Hwa Bank
4. Land Bank of Taiwan
3. Farmers Bank
4. First
5. Hua Nan
6. Mega (CTB + ICBC)
7. Taiwan Business Bank
8. Taiwan Cooperative
Gov’t Ownership < 20%:
1. Bank of Overseas Chinese
Private Banks (34)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Bank of Panshin
Bank SinoPac
Bowa Bank
Cathay United
CDIB
Chinatrust
Chinese Bank
Chinfon Bank
Chung Shing Bank
Cosmos Bank
Cota Bank
Enterprise Bank of
Hualien
EnTie Bank
E Sun
FEIB
Fubon Taipei Bank
Fuh Hwa Bank
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
Hsinchu International
Hwa Tai Bank
IBT
Industrial Bk of Taiwan
Jih Sun Bank
Kao Shing Commercial
Bank
Lucky Bank
Macoto Bank
Shanghai Commercial
Shin Kong Bank
Sunny Bank
Ta Chong
Taichung Commercial
Tainan Business Bank
Taishin
Taitung Business Bk
Union Bank
5
GOVERNMENT BANKS DOMINATE MARKET SHARE
Top 10 Banks
Ranked by Share of Total Assets
Banking Assets by Category
10.3%
8.1%
7.2%
6.7%
6.1% 6.1%
5.3% 5.1%
Wholly Government Owned
Private
Taiwan business Bank
Chinastrust
Chang Hwa
First Commercial
Hua Nan
CTB + ICBC
Land Bank of Taiwan
Taiwan Cooperative
Wholly
Government
Owned
18.9%
Taipei Fubon Bank
4.1% 4.1%
Government
Affiliated
40.3%
Bank of Taiwan
Private
40.8%
Government Affiliated
Source: CBC (September 30, 2004)
6
PRIVATE BANKS MORE PROFITABLE
LEADING BANKS BY NET INCOME & NET INCOME SHARE
15
Net income (%)
Government-affiliated bank
12
11.53
11.05
Private bank
10.74
9.09
9
7.57
7.49
7.31
6.57
6
4.95
3.36
3
2.91
2.47
2.38
2.31
1.72
0
Chinatrust Cathay
ICBC +
Chiao
Tung
Bank of
Taiw an
Taishin
Hua Nan
First
Comm.
Fubon +
Taipei
E. Sun Shanghai Sinopac
Far Intl. Bank
Com.
Eastern of Taipei
Land
Bank
Hsinchu
Int'l Bank
Source: CBC (September 30, 2004)
7
BANKING SECTOR REMAINS FRAGMENTED
Number of Bank Branches
per 10,000 People
Top Five Banks by Market Share (%)
Sweden
90
3.4
81
UK
Portugal
75
Switzerland
74
Austria
2.4
Kuala Lumpur
Chicago
2.0
Seoul
2.0
66
Spain
59
Hong Kong
56
54
Korea
50
Japan
Taiwan
1.9
Hong Kong
Over 400
financial
institutions
in Taiwan
38
Italy
Germany
Taipei
Sydney
1.6
1.3
New York
36
Tokyo
29
Mean 60%
1.0
Mean 1.95
*Note: All data shown in bar graphs above are for 2003
8
TAIWAN IS WORLD LEADER IN OTHER INDUSTRIES
KEY CONGLOMERATES BY INDUSTRY SECTOR
Foundry
TFT
Petrochemical
TSMC
UMC
Formosa
Semiconductor
Testing & Packaging
Au Optronics
Chi Mei
EMS
Hardware ODM
Hon Hai
Asustek
Quanta
ASE
SPIL
Steel
China Steel
Footwear
Pou Chen
9
KEEPING PACE WITH REGIONAL COUNTERPARTS
Top 20 Banks in Non-Japan Asia by Market Capitalization1 (US$ million)
189,794
25,983
Hana Bank
Bangkok Bank
Korea Exchange Bank
ICICI Bank
Chinatrust FHC
Public Bank
Woori Financial Holdings
Mega FHC
State Bank of India
Fubon FHC
Shinhan Financial Group
Overseas Chinese Banking
Malayan Banking
13,404 12,021 11,048
8,676 8,581 7,948 7,696 7,594
6,891 6,875 6,437 5,665 5,620 5,152
UOB
DBS Group
Kookmin Bank
Cathay FHC
BOC HK Holdings
Hang Seng Bank
HSBC Holding
19,791
16,639 15,004 14,849
Taiwan Financial Institutions
Only 1 Taiwan bank in Top 10
Only 4 Taiwan banks in Top 20
1. As of February 15, 2005.
10
BUILDING BLOCKS:
BOLSTERING COMPETITIVENESS
Financial Sector Reform
Financial Sector Privatization
Enhancing
Sector
Competitiveness
Financial Sector Consolidation
Encouraging consolidation through policy change
Increasing competitiveness through conducive regulation
Creating sector transparency through foreign investment
11
CREATING NATIONAL CHAMPIONS
World-standard Management to Fuel
Performance Improvements
Vision for the Future
National
Champion
250
Finish Line
200
Improve Profitability
150
100
Increase Size & Scale
50
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
Start
19
97
19
96
0
TWSE Banking & Insurance Index
Composite of Leading Private Banks
Composite of Leading Government Banks
兆豐金融集團
Mega Holding Group
12
STEPPING STONES:
PRIVATIZATION OF GOVERNMENT BANKS
100% - 50%
Part 1
50% - 20%
Part 2
 Bank of Taiwan
 Chang Hwa Bank
 Land Bank of Taiwan
 Farmers Bank of
China
 Central Trust of China
 Taiwan Coop Bank
 Taiwan Business
Bank
20%
Part 3
 Bank of Overseas
Chinese
 Taiwan Development
and Trust Corporation
 First FHC
 Hua Nan FHC
 Mega FHC
13
PROGRESS: REFORM ACTIVITY
Chang Hwa
Bank
Private placement to foreign investors
Bank of Overseas
Chinese
Transfer of majority ownership from
government to the private sector
Taiwan
Development and
Trust
Sale of core banking assets to another bank
Taiwan
Cooperative Bank
Listed on Taiwan Stock Exchange & prepare
for privatization in 1Q/05
14
POTENTIAL MODELS FOR CONSOLIDATION
1
Government-Related Bank
2
Government-Related Bank
3
Government-Related Bank
4
Government-Related
Bank
+
+
+
+
Government-Related Bank
Private Bank
Private Bank
Foreign Investors
+
Foreign Investors
15
FOREIGN INVESTMENT STRUCTURES
 Sale (control stake vs. minority stake)
 Joint venture
 Strategic investment
 Financial investment
16
Conclusions
Questions & Answers