Case Study: Taishin Financial Group Matt Bernard Nick Kaldunski Shannon O’Hern

Content Overview Background information ▫Taishin Financial Holding Co. ▫Chang Hwa Bank Financial Standing Taiwan Government and China Relations Taiwan’s previous political party Time Line Loan Crisis Outlook on Merge

Company Profile: Taishin Financial Holding Co. Established: February 2002 ▫Marked the first voluntary bank merge in history Profit: 2 nd highest in Taiwan Goal: To be the top brand among Taiwan’s financial holding companies.

Company Profile: Taishin Financial Holding Co. Taishin lead the way in multiple business strategies ▫First Bank to:  Complete a voluntary bank merge ▫1 st in Taiwan’s history  Focus business scope into 3 core competencies ▫Retailing Banking, Wholesale Banking, and Wealth Management

Company Profile: Taishin Financial Holding Co. Notable Awards and Honors ▫Best Core Banking System Plan  Asian Banking & Finance ▫Best Retail Bank in Taiwan  Euromoney & Asian Banker ▫Most Admired Company in Taiwan Award  CommonWealth ▫Ranked Top 10 Asian Banks  Asia Risk

Taishin’s CIS CIS: Corporate Identity System “TS” linked with a lion- like image Color of Gold

Company Profile: Chang Hwa Bank Established: June 1905 under Japan’s governance  Initially called Kabushiki Kaisha Shoka Ginko ▫1945 started to be recognized as Chang Hwa Bank  Celebrated it’s centennial anniversary in 2005 A leader the commercial bank in paid-in capital and sound financial structure

Company Profile: Chang Hwa Bank January 1, 1998: CHB was officially privatized ▫Privatization is the incidence or process of transferring ownership of business from the public sector (government) to the private sector (business)public sectorprivate sector

Financial Standings 2007 EntityNet Profit (NT$mn) Taishin Financial Holdings4,089 Taishin International Bank2,720 Chang Hwa Commercial Bank8,483 Taiwan Securities1,808 Taishin Bills Finance4

Taiwan’s Government & China Relations Currently, Taiwan is not allowed invest in Chinese businesses  With the newly elected President this policy is highly expected to change  Taiwan's’ financial stock has gained 17% this year. Taiwan is looking forward to expanding in Chinese Banks Taiwan has decreased exports to the U.S. from 49% in 1984 to 20% in  The majority of these exports are now going to China.

Taiwan’s Previous Political Party Chen and his cabinet held office during Low domestic demand has been attributed to Taiwan’s economic relations with China  It is estimated 1 million peopled have moved to China since many large companies are moving their operations to China. “ The stagnant domestic demand is chiefly due to political confusion that has kept the legislative Yaun (parliament) form functioning properly.” –David Hong, President of the Taiwan Institute of Economic Research

Taiwan’s Previous Political Party “ The stagnant domestic demand is chiefly due to political confusion that has kept the legislative Yaun (parliament) form functioning properly.” -David Hong, President of the Taiwan Institute of Economic Research ▫Example is the fiscal 2007 (Jan.-Dec.) budget did not pass the legislature until June 2007

Timeline of Merger Oct. 2005: Taishin bought 22% of Chang Hwa for $1.1 billion U.S. dollars Feb. 2006: Newbridge Capital spent $844 million on 22% stake in Taishin Financial Holding  This deal was the largest investment in a Taiwanese financial institution by a foreign investor

Timeline of Merger Sept. 2006: Fitch Rating downgrade its appraisal of Taishin due to concerns over the deteriorating asset quality of the company ▫36% of bank’s lending portfolio consisted of high- yield unsecured consumer loans  This large expense led to a $3.8 billion (NT) last year Oct. 2007: “The Ministry of Finance doesn’t agree with the progress of the merger” ▫- Parker Wu, fund manager at Shinkong Investment Trust

Timeline of Merger June 2007: Taishin expects a NT$640 million by selling 2.5% of Chang Hwa Commercial Bank to Aegon NV Taishin was ordered to sell 2.5% of Chang Hwa before June 15 th due to capital adequacy of Taishin and since the bank fell short of the required level. ▫Order was requested by Financial Supervisory Commission

Timeline of Merger Dec. 2007: Taishin and Aegon NV had finalized a joint venture agreement to conduct business in life insurance and pension products. ▫This is subject to final approval by regulatory authorities

Timeline of Merger Jan. 2008: Taishin Financial put forward a share-swap offer to regain a higer stake in Chang Hwa Feb. 2008: Taishin withdrew share-swap offer, but still has stated its invest in obtaining the bank

Loan Crisis 2006: loses of NTD$16.1 billion 2007: net profit of US$145 million Q1 of 2008: loss of 78% in net profit

Outlook on the Merge Risks Summary Opportunities