ING Barings Taiwan mandate

ING BaringsÆ new advisory role whets the appetite for bank M&A in Taipei.

First out of the traps in the race to lead the FIG revolution in Taiwan appears to be ING Barings. It has just been mandated as Chang Hwa Commercial Bank’s adviser.

In a six-week project, ING Barings will undertake an operational review of the bank, and give it advice on future M&A strategy as well as capital and fund raising avenues. It is a significant mandate, given that Chang Hwa is Taiwan’s fifth biggest bank by assets.

It is also one of the three ‘government-influenced commercial banks’ – along with First Commercial and Hua Nan – and is around 30-40% government-owned (via various entities).

Chang Hwa’s appointment of ING Barings will send out a signal to the market that it is serious about taking part in what is expected to be a massive financial services consolidation in Taiwan.

The driver behind this is the new Financial Services Holding Company Law which is expected to be passed in June. The government hopes this will lead to commercially-driven M&A between Taiwan’s banks and insurance companies.

Thus far there have been two three-way bank mergers in Taiwan, but the next round of consolidation could be driven by the large, well-capitalized insurers.

Key to this process will be Cathay Life, the giant insurer which has a stated intention to get into serious banking (it currently has a stake in a tiny bank called Cathay United). Likewise, it is also reckoned that Fubon and Shinkong will seek to expand into banking – although the latter already has a presence through its link with Tai Shin bank.

Perhaps this is why Chang Hwa has selected ING Barings as its adviser. The process of consolidation in Taiwan will be very reminiscent of what took place in Holland several years ago. ING is probably the most famous bancassurer in the world – and its original merger was driven more by the insurer than the bank, a pattern which could also exist in Taiwan.

Another reason for its winning the mandate is probably thanks to the close relationship the two banks have via their mutual fund distribution partnership in Taiwan.

ING will have 18 bankers working on the advisory role for the next six weeks – led by Jose Hanna, who is the Amsterdam-based global head of the ING Barings institutional and government advisory group.

Another reason why consolidation is inevitable is to aid the banks to address their NPL problems. Chang Hwa had non-performing loans of 7.06% as of the end of April.

On another note, it will be interesting to see whether fellow government-influenced bank, Hua Nan will also appoint an investment banking adviser to prepare it for the coming M&A onslaught.