Fubon Financial Chairman Daniel Tsai
Aiming to Be Financial 'Pride of Taiwan'
Fubon Financial has led Taiwan's financial holding companies in net profit four years running and has gained the deepest foothold in China. In an exclusive interview Daniel Tsai reveals his personal goals and aspirations for the company.
Aiming to Be Financial 'Pride of Taiwan'By Yi-Shan Chen, David Huang and Hsiang-Yi Chang
From CommonWealth Magazine (vol. 522 )
That Fubon Financial chairman Daniel Tsai and vice chairman Richard Tsai are astute and practical executives is not news.
But when Daniel Tsai says with a true sense of mission that he wants Fubon to emerge as the leading Taiwanese-invested bank brand in China and that he aspires to be the "Pride of Taiwan" in the financial sector, it comes as a surprising twist.
"I used to be somebody who really hated using slogans, but now that I'm older my outlook has changed, and I've discovered that slogans are in fact very important. I can really make 'sustainable management' sound so good," Tsai joked in an interview with CommonWealth Magazine.
Complete Greater China Network
The Tsais are descendants of one of Taiwan's wealthiest families, their company originating from the spoils of a family rift. Tsai Wan-lin, who headed Cathay Life Insurance and other Cathay Group companies, had built the family business into a powerhouse. But when his nephew Tsai Chern-chou was accused of embezzling nearly NT$8 billion from the 10th Credit Cooperative of Taipei, which he was running, it led to the split and the breakup of the group into the Cathay and Fubon groups.
At the time, Tsai Wan-lin's brother Tsai Wan-tsai, who would go on to run the Fubon Group before handing it over to his sons Daniel and Richard, received the smallest business in the breakup – the group's general insurance unit, which was immediately renamed Fubon Insurance. In the 30 years since, Fubon has operated under the Cathay Group's shadow.
In the office of 57-year-old Daniel Tsai, there still hangs a picture of him, his brother and his father being interviewed by CommonWealth Magazine at Fubon Commercial Bank's headquarters soon after it obtained its bank license in 1992.
More than 20 years later, Fubon Financial has firmly established itself as a leader in the sector, topping domestic financial holding companies in income and earnings per share four years in a row through 2012 and gaining the upper hand in the intense battle among Taiwanese financial institutions to develop a presence in China. It first acquired a 19.99 percent stake in Xiamen Bank through subsidiary Fubon Bank (Hong Kong) in late 2008. Then, at the end of last year, Fubon Financial and subsidiary Taipei Fubon Bank fought off several rivals to acquire an 80 percent stake in Shanghai-based First Sino Bank, which is licensed to operate throughout China. The acquisition gave Fubon Financial the most complete banking network in Greater China of any Taiwanese-invested bank.
Tsai's Evolving Outlook
With Fubon the most profitable of Taiwan's financial institutions and its stock price currently the highest of any financial institution listed on the Taiwan stock exchange, Taiwan's financial sector is now following in Tsai's shadow.
In his interview with CommonWealth Magazine, Tsai explained how his outlook has evolved over the past 20 years.
"In the first 10 years, I was inexperienced. When I joined Fubon's management, all I thought about was earning my father's recognition and approval," Tsai says.
"In the past 10 years, Fubon has grown stronger, and I've become CEO. So I have been preoccupied with our stock price, hoping to earn recognition from investors for my management skills."
Now that Tsai heads a financial conglomerate that also has interests in the telecommunications, cable television and even retail sectors, what are his goals and aspirations?
Tsai, who rarely accepts media interview requests, discussed with CommonWealth Magazine reporters his management philosophy, China strategy, future plans, and even changes in his thinking in recent years. Here are highlights from this wide-ranging interview, in Tsai's own words:
The Pressures of Being No. 1
Fubon has led financial holding companies in profit for four straight years, but to be honest, the sense of achievement co-exists with pressure.
I've often said that managing a company is like running competitively. It's best to be somebody who comes in second but is always getting better. On the one hand, you always have the first place finisher to use as a goal to motivate yourself. On the other hand, it feels awesome to follow closely behind the front-runner and see your opponent get nervous. Now Fubon Financial has emerged as No. 1 and is being pursued by others. The pressure is now falling on us (laughs).
Since formally merging with ING Antai Life Insurance (Taiwan) in the middle of 2009, we have adjusted our life insurance unit's investment portfolio year-by-year, making major changes that have reduced fluctuations in investment returns.
ING Antai had limited itself to buying government bonds, but we changed its asset allocation. After selling the government bonds at a high price, we bought corporate bonds of companies with sound structures and stable cash returns. The heavens must have been watching over us, because we then bought the corporate debt of IBM, GE and other big companies with good ratings when they were at their cheapest during the global financial tsunami and eurozone debt crisis. We've sold some of those investments at their highs over the past two years, generating considerable profit.
In managing our life insurance business, our top priority is stable, long-term revenue. We decide insurance rates only after looking at estimated returns in investment markets, rather than relying on high-interest policies to grab shares in the first-year premium revenue market.
I think the biggest progress Fubon Financial has made in the past few years has to do with the management team's ability to clearly identify principles and directions guiding day-to-day operations.
Fubon Never Stronger
The consensus I've developed in recent years is that the operating priorities for all of our subsidiaries, whether in the insurance, banking or securities sector, are to enhance customer satisfaction, build long-term brand value, and pursue stable and long-term relationships with customers. The emphasis should not be on the sales results of any particular year.
I feel that the most sacred task of publicly listed companies is steady, continuous growth to create long-term value for shareholders. That's especially true for the financial services sector.
This direction has meant that Fubon has not had "star performers" in the past few years but has instead put together an all-star team. Our top level management team consists of executives who are mostly in their 50s and at the peak of their maturity. They all have a wealth of professional experience and are highly familiar with our management culture. Fubon Financial today is the strongest it has ever been.
We entered the mainland Chinese market very early when we bought a stake in Xiamen Bank through Fubon Bank (Hong Kong), so we have more actual combat experience than others in the industry. That has become our competitive niche in the China market and even in the general corporate banking market.
At our Xiamen Bank branches along China's southeast coast, we mainly go after local business. Fubon will be able to recognize about 100 million renminbi in profit from Xiamen Bank this year and about 200 million renminbi in profit from First Sino Bank in the second half of the year after the acquisition of the bank is completed, which we expect to happen sometime in the middle of the year. The total profit of more than 300 million renminbi we expect to derive from China will be the highest in the Taiwanese financial industry.
On the surface, acquiring First Sino (which will be renamed Fubon First Sino Bank) was not cheap (Fubon paid about 2 times book value), but this step is the most important for Fubon in China in the coming 10 years. I expect that even if interest rates are liberalized, China's banking sector should be quite profitable over the next decade.
First Sino not only has 14 branches in first-tier Chinese cities, it has long been part of China's currency deposit and transfer system. And it has obtained almost every domestic banking license in China.
Getting this kind of resource through an acquisition is far more advantageous than slowly setting up branches to develop China's market. (Foreign banks in China can own either branches or subsidiaries, but not both. With the acquisition of First Sino Bank, Fubon has decided to take the subsidiary route.)
Once the share transfer takes place, we will apply for a retail banking license from the China Banking Regulatory Commission and begin to absorb deposits from the public. First Sino will eventually become Fubon's most important distribution platform in China for life and general insurance.
After our acquisition of First Sino was announced, an avalanche of resumes poured in from top financial executives with five to ten years of management experience in either foreign or local Chinese banks. We had never seen anything like it when recruiting talent in the past. It seemed like they had found the mother ship.
Fubon Financial has always used acquisitions to grow. The most difficult aspect of that is how to manage change. There was a Chinese executive who joked that managing wasn't that hard, that all you have to do is compliment your subordinates and give them rank and face. But I don't think it's that easy.
I believe that the key is still being truly sincere. With every acquisition, we have to expend huge amounts of resources and effort to get the two sides to gel. We want to enable the newly acquired company to get integrated into our management system so that we can harness the (merger's) synergies in the shortest amount of time and have them show up on the bottom line.
Looking back at our earliest acquisition, that of TaipeiBank, in the first two years after the deal was completed, there was absolutely no talk of merging between the two banks. Of the entire Fubon Group, there was only me who went to TaipeiBank to serve as its chairman.
I spent a huge amount of time slowly building mutual trust with TaipeiBank's people and also restructured the system, so that when it came time to formally merge, the two banks were able to hit the ground running. During this process, there were several little tricks and skills that could only be learned from experience.
Based on that experience, after we buy First Sino, we'll want to solidify the unity and cohesion between our company and the new company, because you cannot be without a common mission and vision.
I used to be somebody who really hated using slogans, but now that I'm older my outlook has changed, and I've discovered that slogans are in fact very important (laughs). I can really make 'sustainable management' sound so good. The hard part is making a slogan reality.
The short-term goal I've given myself is for us to gradually catch up to and then overtake our main competitors in the consumer finance and credit card businesses. In China, I want to replicate Fubon's "twin engines" (strong banking and life insurance arms) in Taiwan. I won't rule out using acquisitions in the future to get footholds in the life insurance and securities markets.
In the long-term, the common mission for me and Fubon Financial is to truly institutionalize the company, to take what started as a family business and turn it into a financial institution than can exist sustainably. We even hope to move beyond Taiwan, and shine as the "pride of Taiwan" in the financial sector, both in the China market and internationally.
Translated from the Chinese by Luke Sabatier
Ranking No. 1 in Net Profit
Chairman: Daniel Tsai
President: Victor Kung
1. Using timely acquisitions to increase market share and quickly harnessing their synergies.
2. Fubon has the most bank outlets in China of any Taiwanese bank.
367.115 / 242.021 / 497.129
Net Profit after Tax
28.983 / 30.687 / 20.719
Unit: NT$ billion