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Case Study: Taishin Financial Group

Case Study: Taishin Financial Group. Matt Bernard Nick Kaldunski Shannon O’Hern . Content Overview. Background information Taishin Financial Holding Co. Chang Hwa Bank Financial Standing Taiwan Government and China Relations Taiwan’s previous political party Time Line Loan Crisis

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Case Study: Taishin Financial Group

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  1. Case Study: Taishin Financial Group Matt Bernard Nick Kaldunski Shannon O’Hern

  2. Content Overview • Background information • Taishin Financial Holding Co. • Chang Hwa Bank • Financial Standing • Taiwan Government and China Relations • Taiwan’s previous political party • Time Line • Loan Crisis • Outlook on Merge

  3. Company Profile: Taishin Financial Holding Co. • Established: February 2002 • Marked the first voluntary bank merge in history • Profit: 2ndhighest in Taiwan • Goal: To be the top brand among Taiwan’s financial holding companies.

  4. Company Profile: Taishin Financial Holding Co. • Taishin lead the way in multiple business strategies • First Bank to: • Complete a voluntary bank merge • 1st in Taiwan’s history • Focus business scope into 3 core competencies • Retailing Banking, Wholesale Banking, and Wealth Management

  5. Company Profile: Taishin Financial Holding Co. • Notable Awards and Honors • Best Core Banking System Plan • Asian Banking & Finance • Best Retail Bank in Taiwan • Euromoney & Asian Banker • Most Admired Company in Taiwan Award • CommonWealth • Ranked Top 10 Asian Banks • Asia Risk

  6. Taishin’s CIS • CIS: Corporate Identity System • “TS” linked with a lion-like image • Color of Gold

  7. Company Profile: Chang Hwa Bank • Established: June 1905 under Japan’s governance • Initially called Kabushiki Kaisha Shoka Ginko • 1945 started to be recognized as Chang Hwa Bank • Celebrated it’s centennial anniversary in 2005 • A leader the commercial bank in paid-in capital and sound financial structure

  8. Company Profile: Chang Hwa Bank • January 1, 1998: CHB was officially privatized • Privatization is the incidence or process of transferring ownership of business from the public sector (government) to the private sector (business)

  9. Financial Standings

  10. Taiwan’s Government & China Relations • Currently, Taiwan is not allowed invest in Chinese businesses • With the newly elected President this policy is highly expected to change • Taiwan's’ financial stock has gained 17% this year. Taiwan is looking forward to expanding in Chinese Banks • Taiwan has decreased exports to the U.S. from 49% in 1984 to 20% in 2002. • The majority of these exports are now going to China.

  11. Taiwan’s Previous Political Party • Chen and his cabinet held office during 2000-2008 • Low domestic demand has been attributed to Taiwan’s economic relations with China • It is estimated 1 million peopled have moved to China since many large companies are moving their operations to China. • “The stagnant domestic demand is chiefly due to political confusion that has kept the legislative Yaun (parliament) form functioning properly.”–David Hong, President of the Taiwan Institute of Economic Research

  12. Taiwan’s Previous Political Party • “The stagnant domestic demand is chiefly due to political confusion that has kept the legislative Yaun (parliament) form functioning properly.” -David Hong, President of the Taiwan Institute of Economic Research • Example is the fiscal 2007 (Jan.-Dec.) budget did not pass the legislature until June 2007

  13. Timeline of Merger • Oct. 2005: Taishin bought 22% of Chang Hwa for $1.1 billion U.S. dollars • Feb. 2006: Newbridge Capital spent $844 million on 22% stake in Taishin Financial Holding • This deal was the largest investment in a Taiwanese financial institution by a foreign investor

  14. Timeline of Merger • Sept. 2006: Fitch Rating downgrade its appraisal of Taishin due to concerns over the deteriorating asset quality of the company • 36% of bank’s lending portfolio consisted of high-yield unsecured consumer loans • This large expense led to a $3.8 billion (NT) last year • Oct. 2007: “The Ministry of Finance doesn’t agree with the progress of the merger” • -Parker Wu, fund manager at Shinkong Investment Trust

  15. Timeline of Merger • June 2007: Taishin expects a NT$640 million by selling 2.5% of Chang Hwa Commercial Bank to Aegon NV • Taishin was ordered to sell 2.5% of Chang Hwa before June 15thdue to capital adequacy of Taishin and since the bank fell short of the required level. • Order was requested by Financial Supervisory Commission

  16. Timeline of Merger • Dec. 2007: Taishin and Aegon NV had finalized a joint venture agreement to conduct business in life insurance and pension products. • This is subject to final approval by regulatory authorities

  17. Timeline of Merger • Jan. 2008: Taishin Financial put forward a share-swap offer to regain a higer stake in Chang Hwa • Feb. 2008: Taishin withdrew share-swap offer, but still has stated its invest in obtaining the bank

  18. Loan Crisis • 2006: loses of NTD$16.1 billion • 2007: net profit of US$145 million • Q1 of 2008: loss of 78% in net profit

  19. Opportunities Outlook on the Merge • Risks • Summary

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