BEA set to join in unscrambling AIG investment debacle
Updated: 2009-03-27 07:13
By Lillian Liu(HK Edition)
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HONG KONG: The Bank of East Asia (BEA), the fifth-largest lender in Hong Kong, made a proposal yesterday to purchase the Taiwan wealth management unit of American International Group (AIG) as the giant US insurer sells assets to recover from its disastrous investment losses.
"We have confirmed our intention to purchase the Taiwan firm but the deal is subject to regulatory approval. We are waiting for response from the authorities," BEA's spokeswoman Vera Lung told China Daily over the phone yesterday.
The Hong Kong-based lender submitted an application earlier this week to Taiwan's Investment Commission, which oversees all inbound overseas investment, to buy AIG Wealth Management Services (Taiwan) Ltd.
Ben Kwong, head of research at KGI Asia, said he can't immediate profitability for the acquisition but callled it a good strategic deployment.
"BEA's move is inspired by the implementation of direct shipping, air and postal links across the Taiwan Straits. The bank used to set its focus on Hong Kong and the mainland now it is expanding further into the Greater China markets," Kwong said.
The acquisition may cause other banks in Hong Kong to follow suit, he added.
AIG, crippled by losses on its mortgage investment blunders, has been seeking buyers for its assets since last October to raise cash to repay up to $85 billion borrowed from the US government.
Lung said BEA wants to develop its wealth management business on the island, she declined to comment further.
Some analysts predict the acquisition would involve $10 million to $20 million and it would bring in brokerage and wealth management licenses to the bank.
The Hong Kong-based bank has two branches in Taiwan, one in Taipei another Kaohsiung.
In another move to strengthen its foothold in the region, BEA launched the China UnionPay debit card in Hong Kong yesterday, taking advantage of the growing number of cross-border travelers who rely on the debit card to settle purchases.
The bank said the card can be used to access ATMs (automatic teller machines) in Hong Kong, Macao and the mainland. The transactions are settled in Hong Kong dollars.
China Life Insurance Co, the largest life insurer by premiums in the country, was reported ready to buy assets in AIG to expand its overseas presence, but withdrew its proposal later.
Yang Chao, chairman of China Life, said his company has always kept an eye on good overseas investment opportunities.
"Unlike other Chinese financial institutions, we don't have a foreign strategic partner," he said at a press conference yesterday, but he didn't comment as to why the company canceled its plan to acquire assets of AIG.
Shares in BEA soared 4.07 percent to HK$15.84 yesterday.
AIG Wealth Management (Taiwan), set up in 2007, has a capital of around NT$200 million.
AIG, once the world's largest insurer, received a federal bailout on September 16 after losses in its financial products unit drove it to the brink of collapse.
(HK Edition 03/27/2009 page16)