« Daily Tid-bits | Main | Remaining Gov't Stake in BCA on Sale *Now* »

September 20, 2005

The Sad State of Taiwan Business Bank

It seems like the government may have decided to jettison TBB before they thought to ask if anyone wanted it: the auction being conducted failed when no bidder (even with heavy government incentive) would meet the minimum asking price. Even so, the bank was forced to endure a taste of union power when it underwent a strike by some 2,500 of its 4,000 employees. This may not have queered the auction, but certainly contributed to the resignation of TBB Chair Herman Chung, soon to be replaced by Polaris exec Michael Chang.

In our last entry, we questioned why any bidder would guarantee the employees the three year no-fire contracts they want, or even the two-year guarantee they have been offered. TBB is fundamentally unprofitable and loaded down with bad debts; its major asset being its branch network.

Having seen the carnage inflicted on Taishin's share price for making its insane above-market purchase of Chang Hwa Bank shares from the government, it is even less surprising that high bidder E.Sun was still far away from the government's reserve price.

The Taiwanese government needs to get serious about exercising some strong management discipline at TBB, forcing it to meet performance standards or to be dismembered and sold in pieces with maximum ensuing job losses. In its current state the bank is a drain on the economy, as well as on healthy private banks, and the farce of an auction with no takers casts a pall over the entire financial sector.

Either Goldman Sachs as advisor to TBB is giving lousy advice (for hardly the first time), or they are not being listened to.

Posted by The Banker at September 20, 2005 07:45 PM

Trackback Pings

TrackBack URL for this entry:
http://WWW.asianbanks.net/mt/mt-tb.cgi/37