Bank of East Asia eyes Taiwan, China expansion -paper

HONG KONG, Sept 8 (Reuters) - Bank of East Asia (0023.HK) is in talks to buy a stake in a Taiwanese bank and aims to wrap up a deal to launch its joint venture asset management operation in China before the end of the year, the South China Morning Post reported on Monday.

"We are in talks with one to two banks, and the matter is subject to pricing," the newspaper quoted the bank's chairman, David Li, as saying.

The deal could result in the Hong Kong bank taking a controlling stake in a Taiwanese lender, he said, but gave no further details.

Bank of East Asia, Hong Kong's fifth-largest lender, is also planning an expansion in China by taking a stake in a local lender, Li said.

The bank has teamed up with German partner Union Asset Management and a Chinese wealth management firm to launch an asset management business in the country by the end of the year, Li added.

However, Li said it was difficult for the bank to return to positive growth this year, because its core business growth could be offset by further writedowns on collateral debt obligations (CDOs). He said the bank could resume positive growth in 2009 and 2010.

The Bank of East Asia had in August posted a worse-than-expected 52 percent drop in first-half net profit due to further writedowns linked to the global credit crisis.

Shares of the Hong Kong lender, which have fallen more than 44 percent so far in 2008 compared with a more than 28 percent drop in the blue-chip Hang Seng Index .HSI, rebounded 3.9 percent to HK$30.95 early on Monday morning. (US$1=HK$7.8) (Reporting by Donny Kwok; Editing by Ken Wills)