Pandemic To Fuel Asia Financial Industry Consolidation, Taiwan Billionaire Banker Says

Taiwan, one of the world’s most important tech industry hubs, is known in part for the success of the global electronics manufacturers to make the 2020 edition of the Forbes Global 2000 list of the world’s top publicly traded companies unveiled today. Among them are Apple suppliers Taiwan Semiconductor Manufacturing (No. 108), Hon Hai Precision (No. 121) and Pegatron (No. 900).

One of its largest, most internationally minded financial institutions is Taipei-headquartered Fubon Financial. Fubon, whose business spans much of Asia, moved up to No. 272 on the new list from No. 348 a year earlier. It’s led by billionaire Chairman Richard Tsai, whose family has been one of the most powerful in Taiwan’s financial industry for the past half century. (See related story here.)  Fubon’s business partners include the mainland’s ZhongAn Online and Line Corp. of Japan.

Taiwan, home to about 23 million people, has been lauded for managing to avoid the worst of the global coronavirus pandemic. It hasn’t had a new local case in a month, and has reported a total of only 440 all year. Yet as Covid-19 affects economies worldwide, how do Tsai and Fubon size up its impact on global business and the financial industry?  Financial industry consolidation and dramatic industrial shifts are likely, Tsai said in a written interview. Fubon is also on the watch for merger and acquisition opportunities.

“We believe regional consolidation in the financial services industry will continue as economies of scale have proven to improve operational efficiencies and reduce costs,” Tsai said. “In addition, the headwinds of a global economic outlook adversely impacted by the COVID-19 pandemic, plummeting oil prices and the U.S.-China trade war will not only test the overall soundness of financial institutions’ operations and financial strength, but may also open opportunities for further consolidation.”

Fubon, which recently formed a joint venture in Hong Kong with online insurer ZhongAn, hopes to be involved in that consolidation, he said. “Our aspiration is to be a first-tier financial institution in Asia,” he said. “The joint venture with ZhongAn is example of our dedication in steadily moving towards that vision step by step,” he said

“We are also exploring beyond Hong Kong, to the whole of Asia for possible M&A opportunities. Our aim is to replicate our successful models in Taiwan to build a full- service platform offering financial products to customers for a one-stop shopping experience in a financial supermarket. In the past, we have turned challenges into opportunities by making acquisitions in times of adversity to expand our operations and create value for our shareholders.  In the current turmoil caused by U.S,-China trade war and COVID-19, we are hoping to see more M&A opportunities with valuation levels coming down to a more attractive level.”

“Regulators may also relax some restrictions on the digital financial market, allowing big data analysis and artificial intelligence to be applied more rigorously,” Tsai noted. In that context, “Fubon is prudent in our corporate development and maintains discipline in evaluating opportunities in mergers and acquisitions to complement our organic growth across ASEAN countries including China,” he wrote.

Rising U.S.-China tensions will lead to regional supply chain shifts away from the mainland that will may benefit Asia’s other economies, Tsai said. “As U.S.-China tensions intensify over the COVID-19 pandemic, U.S. officials are encouraging companies to transfer their Chinese production bases to other Asia countries, while the Chinese government is simultaneously pushing to reduce Chinese reliance on the U.S. market,” Tsai said. “Net-net, the acceleration of more diversified supply chains will dramatically change the global industrial landscape. Asian countries outside China may become the main beneficiaries, including Taiwan.”

The experiences of the lockdowns across the region are also likely to give a boost to online business, Tsai said. “As stay-at-home orders have forced lifestyle changes, consumer behavior and business activities needed to adapt as well. A shift in consumer behavior to increase spending online makes it inevitable for business organizations to modify their operation models and add to their technological advancement, including gaming, live broadcasting, e-commerce and online food delivery businesses. The related financial and logistics demands will drive the growth of online payment and delivery services,” he said.

“Not only remote working or education is expected to continue throughout this year, but also online medical services will become the norm in a post-coronavirus world,” Tsai predicted. “While the growth in cloud services and IT security was driven by organizations around the world moving to remote working, the development of 5G is expected to accelerate,” he believes.

Click here for the full Global 2000 list

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@rflannerychina