Finance Minister Lin Chuan and a posse of seven top Taiwanese banks will lead a marketing blitz, or roadshow, in New York and London. Potential investors will want more from Lin than the vague commitments made so far to consolidation incentives, but analysts say the timing is good.

``The progress they have had in cleaning up NPLs (non-performing loans) has certainly put the sector on the radar screens of a lot of global investors,'' JPMorgan strategist and head of research Krista Yue said.

Taiwan hopes top foreign banks - institutions it sees as a role model for a modern industry - will buy strategic stakes and sink in expertise, kickstarting a takeover process that could release cost savings and reduce cut-throat competition.

It also wants portfolio investors to beef up demand for the sell-off, maximizing proceeds to help ease a forecast government budget shortfall of NT$277 billion (HK$69.6 billion) this year, Taiwan's sixth straight annual deficit.

State holdings of varying size in six listed banks have a combined market value of around US$7.2 billion (HK$56.2 billion). In all, 12 state-linked banks are sell-off candidates.

The Taiwan delegation along with investment banks JPMorgan Chase and UBS is due in New York today and tomorrow, and then in London on Monday.

Taiwan has so far offered unspecified tax breaks and speedier regulatory approval for new products as an incentive to banks that can achieve a 10 percent market share.

It has also frozen issuance of new bank branch licenses - an attempt to force 48 banks serving a population of 23 million people into consolidation. In South Korea, 19 banks serve a population twice as large as Taiwan's.

The state aims to halve the number of state-controlled banks to six by the end of the year, and investors already smell profits through cost-savings and reduced competition.

Since a 2004-low reached on August5, the financial sub-index has gained about 22.5 percent, outpacing both the main Taiex index's 18.6 percent gain and the 16.2 percent rally on the electronic index over the same period.

Taiwan Cooperative Bank's shares have soared over 60 percent since their debut in November.

Taiwan banks wrote off a record level of bad loans in 2003 and continued write-offs last year to nearly halve their overdue loan ratio to 3.3 percent in the third quarter from 6.1 percent in early 2003. But analysts say investors who may put up US$1 billion or more need more assurances from the government of full commitment to consolidation.

``One of the primary investor concerns is market fragmentation,'' Morgan Stanley Financial Institutions group executive director Willard McLane said.

Yue went further, wanting reassurance the government was ready to deliver promised incentives and to allow politically unpopular job cuts.

``Investors need to hear more,'' she said. ``The government's willingness to sacrifice a bit to get the progress going in terms of price and allowing staff flexibility for acquirers is key.''

Taiwan state banks have been making provisions for privatization for years, but labor unions and opposition parties worried about potential job losses have stalled the plans. While private firms like Chinatrust Financial Holdings, the owner of Taiwan's largest private bank, boast foreign equity ownership of some 50 percent, some 60 percent of the island's banking assets are still controlled by state banks.

Faced with slowing growth elsewhere, lenders such as Citigroup, HSBC Holdings and Standard Chartered Group are increasingly turning to Asia for acquisitions and revenue boosts. China has become the hottest market. HSBC paid US$1.75 billion last year for the mainland's Bank of Communications.

That kind of direct investment has not happened in Taiwan yet, but analysts say its close manufacturing links with the booming mainland economy could help attract overseas lenders.

REUTERS