Fubon awaits nod for mainland push

PUBLISHED : Monday, 03 April, 2006, 12:00am
UPDATED : Monday, 03 April, 2006, 12:00am

Hong Kong unit hopes to secure Taiwan regulatory approval to open first representative office this year

Taiwan's Fubon Financial Holdings is confident that its Hong Kong banking unit, Fubon Bank (HK), will open its first representative office in the mainland despite delays in getting Taiwan's regulatory approval.

Undaunted by the tangle of red tape, it is pressing on with plans to expand in the mainland through equity investment in city commercial banks as opportunities arise.

As the major shareholder in Fubon Bank (HK), the group sought approval from Taiwan's regulatory authority to open a representative office in Dongguan in the middle of last year in hopes of setting up within the year, but is still awaiting action. 'There's a high probability we will set up the representative office this year,' said Richard Tsai Ming-hsing, vice-chairman of Fubon Financial and chairman at Fubon (HK).

The bank hopes to invest in city commercial banks, especially those in coastal areas but it first has to get its initial office set up in Dongguan. '[Equity investment in] banking is our first priority as there are many Taiwanese merchants there,' Mr Tsai said.

Victor Kung, president of Fubon Financial, said approval from the mainland regulator would come shortly after Taipei's nod.

He said the major concern of Taiwan and mainland regulators was joint supervision, in particular the means by which they could supervise institutions which intended to set up branches in the mainland.

With such supervisory arrangement existing between Taiwan and Hong Kong, and Hong Kong and China, he said Hong Kong might act as an intermediary.

'We hope we can put the idea in force [through our Hong Kong unit] if there are any opportunities [for equity investment],' Mr Kung said.

Fubon's acquisition of Fubon (HK), formerly the International Bank of Asia, in 2003 was seen as a springboard to tapping the mainland's fledgling financial market. Other than banking, Mr Tsai said Fubon Financial was also interested in expanding its insurance business in the mainland through equity investment.

Fubon Financial last year vowed to raise the return on equity ratio of its Hong Kong unit from 8 per cent to 15 per cent in three years.

However, the bank's return was dragged down to just above 6.5 per cent last year as net profit fell 20 per cent.

Mr Kung said the bank was keeping its three-year ROE target of 15 per cent.

'I think we can achieve the 15 per cent target in 2008, but 12 per cent would probably be more realistic,' he said.

Mr Kung blamed the profit fall on its heavy investment in infrastructure and staff to expand bank's Taiwan business.

But he said expenses would be overtaken by profit growth once the infrastructure was fully in place.

'We have about 1,700 Taiwanese accounts on wealth management with assets of about $2 billion since we started the business from scratch last year,' he said.