Lehman Brothers Holdings Inc, the fourth-largest US securities firm by capital, said it bought NT$6.5 billion (US$190 million) of bad loans and properties from Shin Kong Life Insurance Co (新光人壽), the country's third-biggest life insurer.
This was the first sale of non-performing loans by a Taiwanese insurance company, said Bernard Lau, senior vice president of Lehman's Real Estate and Structured Finance group in Hong Kong.
He declined to say how much Lehman paid for the assets, which include commercial and residential properties across the nation.
``There is a steady pipeline of non-performing loans for sale in Taiwan, and most of these loans are secured by real estate,'' said Lau in a telephone interview. ``To a certain extent, the probability of recovery is somewhat assured.''
Banks have been under government's encouragement to write off their overdue loans or sell the problem loans to foreign asset-management companies such as Lehman or Lone Star Asia-Pacific Ltd in order to compete with foreign counterparts.
To achieve that objective, the government since June 2003 has been offering rewards to banks which can lower their non-performing loan (NPL) ratio to under 2.5 percent, Jong Huey-jen (鍾慧貞), deputy director-general of the Monetary Affairs Bureau said yesterday at a press conference.
Jong said that currently there are 10 banks whose NPL ratios are below 2.5 percent and therefore are entitled to the rewards. These rewards will include getting a green light to launch new financial services, easier approval on opening more branches and permission to open offices in China.
In addition, another 13 lenders whose NPL ratios are under 5 percent would be subject to other kinds of rewards, Jong added.
Thanks to the initiatives, Jong said banks held NT$740.5 billion of loans classified as non-performing or under surveillance at the end of June, with the NPL ratio falling to 4.9 percent. That compares with NT$886.6 billion or 6.1 percent of total loans at the end of December.
Taiwan's overdue loan ratio hit a record high of 8.09 percent in April 2002 after the nation's economy contracted by 2.18 percent in 2001 in its worst recession on record.
RSS