This paper aims to examine the business performance of Taiwanese commercial banks before and after financial holding companies were founded from the perspective of business diagnosis. The financial indicators 4 cases of financial holding companies between 1999 and 2003 were analyzed as they are the first two incorporated financial holding companies in Taiwan. The research found that financial structure and liquidity were significantly improved while profitability decreased. These findings suggest the change to financial holding companies is not a ticket to profitability and sound management. Financial holding companies should strive to enhance their competitiveness instead of aimlessly expansion which leads to diseconomy of scale. Brand name and reputation are proposed as the most important sources of competitiveness. After Taiwan's accession to WTO, foreign competition will force financial companies to focus their niche, maintain differentiation strategy, develop a comprehensive product line and integrate the resources of subsidiaries in order to secure their business performance.