Taiwan Ratings Corp (中華信評), the local partner of Standard & Poor's ratings services, yesterday said the overall credit quality of Taiwan's banking sector still bore negative outlooks during the first half of 2002.
In its latest ratings-and-outlook report for the nation's finance industry, Taiwan Ratings said the banking sector continued to lead the way in the industry's ratings downgrades. The industry is made up of the banking, securities, insurance and bills-finance sectors. The banking sector contributed 75 percent of the industry's downgrades during the first six months of the year.
However, the deterioration of the country's highly competitive and overcrowded banking industry appears to have slowed down during the six-month period from the same period a year ago, Taiwan Ratings said in a statement.
"With both a low profitability and a low capital-adequacy rate, local banks are still under great pressure from asset deterioration," said Mei Chiang (
Although many local banks have recently made great efforts to write off non-performing loans, Chiang said that the banking sector's impaired-assets ratio is expected to hit 18 percent by the year's end.
"Even if two percent of bad loans were to be written off, the ratio will continue to stay at 15 percent or above," she said.
Among the 28 local banks that were rated by Taiwan Ratings in the report, 12 banks maintained negative outlooks, according to the statement. These banks include Bank of Taiwan (台灣銀行), Taiwan Cooperative Bank (合作金庫), Taiwan Business Bank (台灣中小企銀), the Farmers Bank of China (中國農民銀行), Grand Commercial Bank (萬通銀行), Asia Pacific Bank (亞太銀行), Union Bank of Taiwan (聯邦銀行), the Chinese Bank (中華銀行), En Tie Commercial Bank (安泰銀行), Hsinchu Commercial Bank (新竹商銀), Macoto Bank (誠泰銀行) and Cosmos Bank (萬泰銀行).
The rating outlooks of the remaining 16 banks are stable while none are positive, according to Taiwan Ratings.
Last year, one bank was given a positive outlook, while 16 bore negative outlooks and nine had stable outlooks.
The outlook of First Commercial Bank's (第一銀行) ratings was changed to stable from negative, mainly because of the expected alleviation of asset-quality pressure, Chang said. First Commercial sold off NT$56.5 billion (US$1.7 billion) of bad loans to three buyers on Wednesday, allowing the bank to liquidate over NT$70 billion in non-performing loans this year.
As for other sectors in the finance industry, five newly formed financial holding companies were rated to have stable outlooks, despite the short-track record, Taiwan Ratings said. The overall risk profile of 25 securities companies were rated generally higher than that of banks, it said.
Nine securities firms saw their rating outlooks revised to positive while Fuh-Hwa Securities Finance (復華證金) and Jih Sun Securities Co (日盛證券) were adjusted downward to negative.
Six out of seven insurers were rated as stable while Union Insurance Co (友聯產保) was on a negative credit watch.
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