Cross-strait liberalisation is the key to
overseas expansion for Taiwan banks
􀀗 Chinatrust and Fubon will be the
greatest beneficiaries, in our view
Presidential election a catalyst? The 22 March 2008
elections could trigger changes to make cross-strait
financing a key long-term growth driver for ambitious
Taiwan banks keen to escape the shackles of the crowded
and competitive domestic market.
Some traditional giants could lose market share. Any
deregulation will not benefit all banks equally. Broad
coverage and a strong deposit base are not the only keys to
success…clear strategy and proven execution capabilities
could become more critical. We rank our coverage universe:
􀀗 “Winners”: Chinatrust and Fubon
􀀗 “Safe plays”: Cathay and Mega
􀀗 “Laggard”: SinoPac
Cross-strait liberalisation does not drive immediate
benefits. We expect cross-strait financial liberalisation will
be a gradual process and potential benefits will take time to
materialise. In the meantime we remain cautious about the
domestic operations and core fundamentals that could make
near-term momentum “bumpy”.
Based on our scenario analysis under different assumptions
for overseas growth, Fubon may be in the best position to
post an earnings surprise to the upside of our forecasts
followed by Chinatrust. Of course this is predicated on the
pace and approach of cross-strait liberalisation.