Taipei, May 27 (CNA) Cathay Financial Holding Co. , one of the largest financial holding firms in Taiwan, has agreed to acquire the Canada-based Bank of Nova Scotia's banking assets in Malaysia as part of the Taiwanese banking group's efforts to extend its reach in the Association of Southeast Asian Nations (ASEAN).
Cathay Financial said that it will spend US$255 million to acquire the Canadian bank's subsidiary -- the Bank of Nova Scotia Berhad -- through Cathay United Bank and Cathay Life Insurance Co., two wholly-owned units of the Taiwanese financial conglomerate.
The acquisition deal is pending regulatory approval from the governments in Taiwan and Malaysia, and is expected to be completed in the second half of this year, Cathay Financial said.
It added that since the Taiwan dollar rose about 6 percent against the U.S. dollar in the first quarter, when the Malaysian Ringgit depreciated some 10 percent against the greenback, it has got a good deal on the acquisition.
After the deal is finalized, Cathay United Bank is expected to own a 51-percent stake in the Bank of Nova Scotia Berhad and become the first Taiwanese bank to have a subsidiary in Malaysia, while Cathay Life will hold the remaining 49 percent, the financial holding firm said.
According Cathay Financial, the Bank of Nova Scotia Berhad, found in 1973, currently runs three branches in Kuala Lumpur, Penang and Johor Bahru and specializes in corporate banking with customers in the financial, agricultural and manufacturing sectors.
The bank has a workforce of about 70, and after the acquisition, Cathay Financial will retain the employees for one year.
After the deal is sealed, Cathay United Bank is expected to add three outlets in Kuala Lumpur, Penang and Johor Bahru, expanding its presence beyond the Labuan branch and the Kuala Lumpur marketing office, which have existed for almost 20 years.
Market analysts said that since the financial authorities in Malaysia keep a tight grip on the country's banking business by controlling the issuance of licenses for banks to set up branches or subsidiaries, foreign banks have to use acquisition deals to enter the market or extend their reach there.
The acquisition is expected to allow Cathay United Bank to conduct Ringgit-denominated business in the Malaysian market, Cathay Financial said.
Lee Chang-ken, president of Cathay Financial, told the press that the deal will allow the financial group to have a larger network in the region.
Lee said that he is upbeat about the Malaysia banking sector since the country ranks as the third largest economy in the ASEAN and the acquisition is a strategic deal for Cathay Financial to penetrate the region.
In addition to Malaysia, Cathay United Bank currently operates branches or representatives offices in Singapore, Hong Kong, Thailand, Laos, Vietnam, Indonesia, Myanmar and the Philippines in the Southeast Asian region.
Meanwhile, Cathay Financial also owns a stake of about 25 percent in Bank Mayapada in Indonesia and the Philippines' Rizal Commercial Banking Corp (RCBC).
