Stanchart goes for full control of Hsinchu: worth it?

It seems that Standard Chartered is at it again. The U.K.-based lender that makes two-thirds of its profit in Asia, has made another move for an Asian bank. It raised its stake in Taiwan's Hsinchu International Bank to 80 percent, nearing the completion of the first overseas takeover of a Taiwan-based lender.

It looks to combine Hsinchu's 83 branches with those of its existing Taiwan network, according to Mervyn Davies, StanChart chief executive officer said. Standard Chartered already has 80 percent of Hsinchu's stake, a day before the end of a buyout offer, said Davies, of the London-based lender. Hsinchu ranks as Taiwan's seventh-largest private sector bank with 2.4 million consumer current accounts and 115,000 business accounts.

"Taiwan is the fifth-largest economy in Asia and its fourth-biggest banking revenue pool, and we've got an opportunity to buy a well-run, well-positioned bank there," Davies said.

"We are delighted to identify a good bank with a strong customer base in Hsinchu," Davies said at a press conference in Beijing. "This complements our very large scale business in the region and increasingly in China."

Stanchart seeks to capitalise on strong growth in trade and investment flows between Taiwan and the rest of Asia but the timing of the Hsinchu bank deal was a "small gamble," according to an Oct. 1 report by CreditSight. Rising defaults forced banks in Taiwan to write off NT$210.8 billion of bad debt last year, up 30 percent from 2004, statistics on the Web site of Taiwan's Financial Supervisory Commission showed. This takeover is also happening amidst suspicions of insider trading as Hsinchu International Bank share prices were 'boosted in active turnover during the Sept 13-29 period', the two weeks just before StanChart's announcement.

The $1.2bn offer comes at a hefty price as it represented a 40 per cent premium over Hsinchu's $861m stock market value. It is also Standard Chartered's biggest acquisition since the purchase of Korea First Bank for $3.3bn in January 2005.

Will the acquisition of Hsinchu International Bank help Stanchart gain a firmer foothold in Asia and Taiwan? Will they be able to overcome the NT$210.8 billion bad debt problem? Tell us what you think.