Taiwan's E Sun Commercial Bank has announced plans to acquire a 70 per cent stake in Cambodia’s Union Commercial Bank (UCB) for $69.33 million.

The acquisition will take place once certain procedures in the contract are implemented, according to a statement by E Sun’s Taiwan-listed parent, E Sun Financial Holding (ESFH), on the Taiwan Stock Exchange website.

The deal still needed to be approved by regulators in  Taiwan and Cambodia, ESFH president Joseph Huang said in a report in The Taipei Times on Saturday.

E Sun had planned to open its own branch in Cambodia after receiving the green light from Taiwan’s financial regulatory body last year.

But it decided instead to buy a stake in UCB, noting that the Cambodian bank “shares similar ideas about business development”, Huang was reported as saying.

“E Sun intends to copy its business model at the Cambodian lender to help boost its financial proficiency and scale of economies,” he said.

UCB had $330 million in assets as of December last year, making it Cambodia’s eighth-largest bank, with a 3.2 per cent market share.

Neither bank could be reached for comment.

UCB was founded in 1994. According to its annual reports, its net profit after tax in 2011 was $4.48 million — more than four times that in 2010 but slightly less than 2009's $4.56 million.

It is the latest local lender to be acquired by a foreign bank.

Last year, the Cambodia-based Singapore Banking Corporation and the OSK Indochina Bank were acquired by Taiwan’s Cathay United and Malaysia’s RHB Capital, respectively.

ANZ Royal chief executive Grant Knuckey said this trend was “not uncommon” for an emerging market such as Cambodia that had a growing number of opportunities “from the perspective of foreign banks”.

Knuckey foresees more acquisitions within five years.

“It is positive overall for the banking sector, as fresh capital and foreign banking expertise are coming in,” he said.

“Competition will increase, but it forces everyone to raise their standards, although it may lower returns for banks.

“Taiwanese banks have a natural customer base here, as many Taiwanese companies are already operating here.”

In an article in the Post last year, National Bank of Cambodia director-general Ngoun Sokha said she did not feel that such consolidations suggested the banking industry was “going down”.

“What we want is to fully encourage [local] banks to seek a strong partner when they see that we are not strong enough,” she said.

“We encourage them to consolidate to be stronger in the industry, as we are at that stage of development.”

To contact the reporter on this story: Low Wei Xiang at [email protected]