ICBC Seeks Sinopac Stake in China’s First Bid in Taiwan

Industrial & Commercial Bank of China Ltd. plans to buy 20 percent of Bank Sinopac in the first mainland investment in a Taiwan lender, pushing the parent company’s share price up the most in more than three years.

Sinopac Financial Holdings Co. jumped as much as 7 percent in Taipei, the biggest gain since August 2009, and traded at NT$15 at 9:17 a.m., a gain of 4.9 percent. The sale is valued at about NT$20 billion ($670 million), the publicly traded company’s Chief Financial Officer Michael Chang said at a press conference in the island’s capital yesterday.

Sinopac and other banks stand to benefit from partnerships with mainland lenders such as ICBC, the world’s largest bank by market value, as they seek to expand outside Taiwan’s saturated market. Chinese President Xi Jinping has pledged to promote cross-strait ties, continuing efforts of the previous administration.

“The deal is positive for Sinopac as there are too many banks in such a small market as Taiwan,” Michael On, president of Beyond Asset Management Co., said by phone after the announcement. “Banks in Taiwan can expand in the China market through mutual investment with Chinese banks. There will be more deals like this.”

Sinopac Financial’s rally compares with a 0.3 percent gain in the benchmark Taiex index today. The MSCI Taiwan Financials index has gained 11 percent this year.

Rule Changes

Taiwan’s Financial Supervisory Commission said April 1 mainland China banks will be allowed to take a 10 percent stake in listed financial institutions, 15 percent in unlisted firms and as much as 20 percent of banking units of financial holding companies, compared with a previous 5 percent across-the-board cap. The announcement followed a meeting between China Banking Regulatory Commission Chairman Shang Fulin and FSC Minister Chen Yuh-chang.

Regulatory changes allowing for the higher limits will take effect as soon as possible pending final approval by the Cabinet, Kuei Hsien-Nung, director general of the FSC’s banking bureau, said by phone yesterday.

In another industry, China Mobile Ltd. has been waiting four years for a change in Taiwan’s rules to allow its planned purchase of 12 percent of Far EasTone Telecommunications Co. to proceed. Far EasTone Chairman Douglas Hsu said in January a loosening of restrictions is “a matter of time.”

ICBC said in yesterday’s statement the deal will “deepen financial cooperation and promote economic and trade exchanges across the strait.” The purchase price will be between NT$18.7 billion and NT$23.5 billion, and either party can cancel the agreement after a year, according to the statement.

Tensions Ease

China and Taiwan have been ruled separately since 1949, when the Kuomintang government fled to the island during a civil war against Communist forces. Tensions eased after Taiwan President Ma Ying-jeou took office in 2008 and worked to strengthen economic ties with the mainland.

Xi said in February that Communist Party leaders have a duty to seek peaceful reunification with Taiwan and pledged to uphold the one-China principle, the official Xinhua News Agency reported after a meeting between the mainland leader and the Kuomintang’s Honorary Chairman Lien Chan.

Taiwan banks began taking yuan deposits on the island in February, as well as underwriting debt in the mainland’s currency, after a clearing agreement was signed last year. China, with a population more than 50 times bigger than Taiwan’s, is the island’s largest trading partner.

Sinopac’s Chang said the partnership will allow the bank to “make progress” with its yuan business and hopes to help ICBC clients issue offshore yuan bonds and new shares in Taiwan.

Overseas Purchases

The April 1 meeting between cross-strait banking regulators was the third since regular contact started in 2011.

ICBC Chairman Jiang Jianqing has spent more than $6 billion on acquisitions in regions from Asia to South Africa and the Americas over the past five years as he seeks to triple the share of profit coming from abroad to 10 percent.

The lender completed a purchase of 80 percent in Standard Bank Group Ltd.’s Argentine unit last year and acquired control of Bank of East Asia’s U.S. unit for $140 million in July. Its 2007 purchase of a 20 percent stake in Johannesburg-based Standard Bank Group for $5.4 billion was the China’s biggest overseas purchase at that time.

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