Cathay Financial in talks to acquire bank in Malaysia

Taipei, Cathay Financial Holding Co. (???), one of the largest financial holding companies in Taiwan, said Thursday that it has started exclusive talks to acquire the Canada-based Bank of Nova Scotia's banking assets in Malaysia.

The Canadian bank announced last year that it was disposing of all of its subsidiary -- Bank of Nova Scotia Berhad -- as part of a plan to scale back its operations in Asia, and was seeking a suitor.

In a statement Cathay Financial filed with the Taiwan Stock Exchange, the Taiwanese financial firm said the talks with the Canadian bank for the acquisition will continue until the end of April.

Cathay Financial said that if the talks proceed smoothly, the acquisition plan will be carried out by its 100 percent-owned subsidiary, Cathay United Bank (????). Cathay United Bank is expected to become the first Taiwanese bank to own a subsidiary in Malaysia, it said.

Local media reported that the Bank of Nova Scotia Berhad, headquartered in Kuala Lumpur, has more than US$1 billion in assets with a net worth of about US$300 million. The Malaysian subsidiary specializes in corporate banking.

Market analysts said that since the financial authorities in Malaysia keep a tight grip on the country's banking business by controlling the issuance of licenses for banks to set up branches or subsidiaries, foreign banks have to use acquisition deals to enter the market.

Currently, Cathay United Bank runs a branch in Labuan, a federal territory of Malaysia, but since the location is remote, the Taiwanese bank aims to extend its reach to Kuala Lumpur in a bid to seek more business opportunities in Malaysia, analysts said.

The Labuan branch focuses on foreign currency trading but is not allowed to conduct Malaysian Ringgit-denominated transactions, analysts said, adding that if the deal to buy the Bank of Nova Scotia Berhad is successful, Cathay United Bank is expected to conduct Ringgit-denominated business in the Malaysiaa market.

Analysts said that Cathay Financial is expected to use funds provided by Cathay United Bank and Cathay Life Insurance Co. (????), the flagship entity of the financial holding firm, to finance the acquisition. In Taiwan, many life insurers, such as Cathay Life, are sitting on large cash assets and are eager to find investment tools. The deal to acquire the Bank of Nova Scotia Berhad will provide a good channel for Cathay Life to park its money.

However, Cathay Financial did not disclose any details about the financial terms under the acquisition deal.

Outside Malaysia, Cathay Financial owns a stake of about 25 percent in Bank Mayapada in Indonesia and the Philippines' Rizal Commercial Banking Corp (RCBC).

The pace of Taiwanese banks extending their footholds in Malaysia has been slow. Last year, CTCB Financial Holding Co. (???) dropped a plan to acquire the assets of Royal Bank of Scotland Group Plc (RBS) in Malaysia due to a failure to secure regulatory approval.

Source: Focus Taiwan News Channel