Tue, Oct 28, 2003 - Page 11 News List

Bank loans rise 2.1 percent, biggest gain in 30 months

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Banks' lending rose 2.1 percent last month, the biggest gain since March 2001, because US-led global economic growth is encouraging more companies to borrow to expand.

Total loans by the nation's 405 financial institutions -- including the central bank, local and foreign lenders, and credit cooperatives -- rose to NT$13.74 trillion (US$404.4 billion) last month, from NT$13.46 trillion last year, the fifth monthly rise.

"Appetite for lending has been revived, especially from exporters in computer or electronics-related industries, benefiting from a US-led global economic recovery," said Allen Peng (彭友倫), executive vice president of corporate banking at Cathay United Bank, the lending arm of Cathay Financial Holdings Co (國泰金控).

Export orders grew last month at their fastest pace in a year, climbing to a record. Orders -- indicative of shipments in one to three months -- rose 20.4 percent from a year earlier to US$15.4 billion. Overseas sales account for about half of the nation's GDP.

Hon Hai Precision Industry Co (鴻海精密), the country's biggest electronics company by sales, said on Oct. 18 that it will spend US$18 million to buy a mobile-phone factory belonging to Motorola Inc in Chihuahua, Mexico.

Companies also used the nation's record-low interest rate to increase borrowing at lower costs.

The central bank has cut its benchmark interest rate 15 times since December 2000; the most recent reduction in June lowered its key rediscount rate, charged to commercial lenders for 10-day loans, to a record 1.375 percent from 1.625 percent.

"Under the expectation interest rates may rise in the third quarter next year, companies tend to arrange their funding for expansion to benefit from the record low interest rate," Peng said.

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