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Ministry of Finance

Ministry of Finance. Taiwan Financial Services Conference Investor Presentation. March 2005. ACHIEVEMENTS IN THE BANKING SECTOR. Decrease in Total Number of Banks. Reduction in System NPL Ratio 1. 1. 2. Increase in Profitability (Pre-tax ROAE). 3.

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Ministry of Finance

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  1. Ministry of Finance Taiwan Financial Services Conference Investor Presentation • March 2005

  2. ACHIEVEMENTS IN THE BANKING SECTOR • Decrease in Total Number of Banks • Reduction in System NPL Ratio1 1 2 • Increase in Profitability (Pre-tax ROAE) 3 1. Broad-based NPL consistent with international NPL definition

  3. TAIWAN BANKING MARKET RANKS THIRD IN ASIA(excluding Japan) • 2003 Total Banking System Assets (US$ bn) • 3,290 • China • Hong Kong • Taiwan • South Korea • India • Malaysia • Singapore • Thailand • Indonesia • Philippines

  4. BANKING SECTOR: IMPROVEMENT & RECOVERY • Total Loan Assets*USD billion • Banking Sector NPL Ratio**(%) • 1998 • 1999 • 2000 • 01 • 02 • 03 • 04*** • 1998 • 1999 • 2000 • 01 • 02 • 03 • 04*** * Based on exchange rate of US$1=NT$33 ** Domestic banks only *** First 9 months; before 2001 NPL ratio is in narrow base – not include surveillance loans Source: Bureau of Monetary Affairs, Central Bank

  5. BANKS IN TAIWAN • Wholly Government Owned (4) • Government Affiliated (9) • Private Banks (34) 20%≤Gov’t Ownership <100%: • Bank of Taiwan • Central Trust • Export-Import Bank • Land Bank of Taiwan 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Bank of Panshin Bank SinoPac Bowa Bank Cathay United CDIB Chinatrust Chinese Bank Chinfon Bank Chung Shing Bank Cosmos Bank Cota Bank Enterprise Bank of Hualien EnTie Bank E Sun FEIB Fubon Taipei Bank Fuh Hwa Bank • Hsinchu International • Hwa Tai Bank • IBT • Industrial Bk of Taiwan • Jih Sun Bank • Kao Shing Commercial Bank • Lucky Bank • Macoto Bank • Shanghai Commercial • Shin Kong Bank • Sunny Bank • Ta Chong • Taichung Commercial • Tainan Business Bank • Taishin • Taitung Business Bk • Union Bank • Bank of Kaohsiung • Chang Hwa Bank • Farmers Bank • First • Hua Nan • Mega (CTB + ICBC) • Taiwan Business Bank • Taiwan Cooperative Gov’t Ownership < 20%: • Bank of Overseas Chinese

  6. GOVERNMENT BANKS DOMINATE MARKET SHARE • Banking Assets by Category • Top 10 Banks • Ranked by Share of Total Assets Government Affiliated40.3% Private40.8% Wholly Government Owned18.9% Source: CBC (September 30, 2004)

  7. PRIVATE BANKS MORE PROFITABLE • LEADING BANKS BY NET INCOME & NET INCOME SHARE Government-affiliated bank Private bank Source: CBC (September 30, 2004)

  8. BANKING SECTOR REMAINS FRAGMENTED • Top Five Banks by Market Share (%) • Number of Bank Branches per 10,000 People Over 400 financial institutions in Taiwan Mean 60% Mean 1.95 *Note: All data shown in bar graphs above are for 2003

  9. TFT Petrochemical Steel China Steel Formosa Au Optronics Chi Mei Hardware ODM Foundry SemiconductorTesting & Packaging Asustek Quanta TSMC UMC ASE SPIL Footwear EMS Pou Chen Hon Hai TAIWAN IS WORLD LEADER IN OTHER INDUSTRIES • KEY CONGLOMERATES BY INDUSTRY SECTOR

  10. Taiwan Financial Institutions KEEPING PACE WITH REGIONAL COUNTERPARTS • Top 20 Banks in Non-Japan Asia by Market Capitalization1 (US$ million) Only 1 Taiwan bank in Top 10 Only 4 Taiwan banks in Top 20 • As of February 15, 2005.

  11. Enhancing Sector Competitiveness Financial Sector Reform Encouraging consolidation through policy change Financial Sector Privatization Increasing competitiveness through conducive regulation Creating sector transparency through foreign investment Financial Sector Consolidation BUILDING BLOCKS:BOLSTERING COMPETITIVENESS

  12. Finish Line Improve Profitability Increase Size & Scale Start CREATING NATIONAL CHAMPIONS • World-standard Management to Fuel Performance Improvements • Vision for the Future National Champion 兆豐金融集團Mega Holding Group

  13. STEPPING STONES:PRIVATIZATION OF GOVERNMENT BANKS 50% - 20% 100% - 50% 20% Part 1 Part 2 Part 3 • Bank of Taiwan • Land Bank of Taiwan • Central Trust of China • Taiwan Coop Bank • Chang Hwa Bank • Farmers Bank of China • Taiwan Business Bank • First FHC • Hua Nan FHC • Mega FHC • Bank of Overseas Chinese • Taiwan Development and Trust Corporation

  14. Chang Hwa Bank Private placement to foreign investors Bank of Overseas Chinese Transfer of majority ownership from government to the private sector Taiwan Development and Trust Sale of core banking assets to another bank Taiwan Cooperative Bank Listed on Taiwan Stock Exchange & prepare for privatization in 1Q/05 PROGRESS: REFORM ACTIVITY

  15. POTENTIAL MODELS FOR CONSOLIDATION + Government-Related Bank Government-Related Bank 1 + Government-Related Bank Private Bank 2 + Government-Related Bank Foreign Investors 3 + + Government-Related Bank Private Bank Foreign Investors 4

  16. FOREIGN INVESTMENT STRUCTURES • Sale (control stake vs. minority stake) • Joint venture • Strategic investment • Financial investment

  17. Conclusions

  18. Questions & Answers

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