After the finalization of a relief program for credit and cash card debts, the nation's problem with bad consumer loans that has been hurting the profitability of local banks is expected to drag on longer than it was previously estimated, analysts said yesterday.
"This will definitely prolong the consumer-banking default loan issue, which was expected to ease off during the first quarter of next year," Jesse Wang (
But it is still too early to assess the real impact on the profitability of the nation's banks, Wang added.
BNP Paribas, which currently holds a neutral rating on Taiwan's financial sector, will not downgrade its weighting in the near future, he added.
Wang currently gives Chinatrust Financial Holding Co (
Chinatrust Financial shares were unchanged at NT$26 (US$0.78) while Taishin shares edged down 0.56 percent to NT$17.6 on the Taiwan Stock Exchange yesterday.
To help more than 400,000 borrowers who are currently drowning in mounting credit and cash card debt, lawmakers yesterday agreed on the bail-out program proposed by banks.
Under the relief scheme, indebted borrowers whose unsecured loans amount to at least 25 times their monthly salaries but who have a good record of repayments would be eligible for five different installment programs with periods ranging from 12 months to 80 months and five graded interest rates of between 2.88 percent and 12.88 percent.
Cardholders who have failed to make payments for more than 30 days and have a debt burden ratio of over 80 times their salaries will be offered a preferential 80-month installment repayment with a zero interest rate.
Meanwhile, borrowers will be required to pay at least 10 percent of their new credit card bills, up from an average of 2 percent to 5 percent currently.
The bad consumer loan problem may not ease off until after the third quarter of next year, at least two quarters later than previously forecast, said Chu Yu-chun (朱玉君), a financial sector analyst at SinoPac Securities Corp (建華證券).
Things will still be difficult for local banks during the first half of next year with the large amount of provisions, the back-up money used in writing off defaulted loans remaining an issue, said an analyst at an European brokerage in Taiwan, who asked to remain anonymous.
The banking sector will suffer from slow growth next year, in part due to the credit crunch being subject to the pressure of mounting bad loans, and that will lead to low single-digit growth in loans, compared with about 8 percent this year, he said.
As of now, the Swiss brokerage retained an "overweight" rating for Taiwan's banking sector, he added.
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