Transcript Financial Holding Companies - The New Competitive Dynamics Mei Chiang Director

Financial Holding Companies The New Competitive Dynamics
Mei Chiang
Director
Financial Services Ratings
Taiwan Ratings Corp.
Reshaping Financial Landscape
-
With their substantial and growing market
shares, FHCs have already played a
critical role in reshaping Taiwan financial
landscape.
FHCs & Their Members
Make Up of FHCs
Assets
Sec
3%
Bank
73%
NLI
1%
LI
17%
Net Worth
Sec
16%
BFC
8%
Bank
38%
Sec
13%
NLI
4%
LI
11%
Profits
BFC
6%
NLI
5%
Bank
61%
LI
31%
BFC
13%
Substantial Market Shares
Assets
FHC
42%
Profits
Net Worth
FHC
50%
FHC
55%
Accelerating Market Transformation
- Taking advantage of increased flexibility, such as
merger & acquisitions, capital restructuring and
funding capability, FHCs are actively grasping
opportunities to enhance their competitiveness.
Market transformation is set to accelerate, with
differentiation among peers expected to widen.
Mergers under FHCs
Securities Firms
Banks
SinoPac + National
Taishin + Dah An
Barits + Int’l + Chun Hsin
Cathay United + UWCCB
Grand Cathay + First Taiwan
Chinatrust + Grand
Fubon + TAIPEIBANK
Insurance Companies
Chiao Tung + ICBC
Bills Finance Companies
Capital Restructuring
Capital upstream
NT$bn
Cathay Life
Year
7.7
2002
10.0
2002
Fuh Hwa SFC
2.5
2002
Fubon Securities
7.0
2003
Chung Hsin BFC
3.0
2004
Fubon Insurance
Overseas Issuance
ECBs rated by S&P's
US$mn
Issue ratings
Cathay FHC
700
BBB+
Fubon FHC
688
BBB
Chinatrust FHC
350
BBB-
CD FHC
310
BBB+
SinoPac Holdings
230
BB+
Creating New Competitive Dynamics
- Consolidated group strength, synergies,
integration risks have become the new
factors that impact a financial institution's
competitiveness.
Poential Synergies





Cross selling
Cost saving
Capital allocation
Diversification
Economies of scale
Integration Risks
 Loss of assets
 Culture crash
 Rising complexity for mangement
FHC Rating Methodology




Status quo ratings for key subsidiaries
Notional group rating
Notching down for holding company
Final ratings for subsidiaries
Rating Issues in Assessing Taiwan FHCs





Cross financial sectors
Frequent change of management & strategies
Active merger activities
Evolving roles for subsidiaries
Testing fungibility of resources
Rating List
S&P
TRC
CD FHC
BBB+
twAA-
Cathay FHC
BBB+
twAA-
Fubon FHC
BBB
twAA-
Mega FHC
Chinatrust FHC
twAABBB-
Hua Nan FHC
Sinopac Holdings
twA+
twA+
BB+
twA-