ChinaTrust Financial Holding Co., the owner of the largest credit card issuer in China, is looking at potential takeover possibilities to further consolidate what has been an excellent growth business in China.
The Initial Steps
The board voted to approve doubling the capital behind the bank to make it better suited to withstand large financial losses and to allow the company to merge with other businesses within its industry. As regulations plague credit card issuers in the United States, credit cards are a growing favorite among China's emerging middle class.
A Number of Companies to Buy
Many international holdings and Chinese banks hard hit by the recession have given ChinaTrust the opportunity to buy shares as part of an investment bank investment. Currently, the company is looking through the opportunities and possible ways to raise cash for a takeover. At present, the options include selling additional stock or selling debt as a means to finance the measure; however, stock swaps and other methods are being carefully considered.
Another Win for International Relations
The bank currently operates in both Taiwan and on the Chinese mainland, but it awaits approval from the Chinese government to further extend its operations. It is suspected that the company will be cleared to grow and could further forge a tie between China and Taiwan both economically and socially. Both nations have previously been in intense discussions, but relations have since cooled and both parties are at a point in which the two are operating in a friendly fashion.
Fiscally Sound, Though Still Lagging
ChinaTrust is fiscally sound, but its profit growth has been lagging. The company reported a net income that was 31% lower than last year on higher defaults and differences in currency exchange rates. Though the numbers look weak when compared year to year, the first quarter earnings were actually much better than the fourth quarter of 2008 and the company is optimistic about the future. Should the company be allowed to extend its borders, next quarter earnings could return to normal on higher revenues led by a merger or acquisition. At this time, it is unknown which companies ChinaTrust may purchase; however, there are a variety of Chinese firms that could use the capital infusion.