The nation's banking sector is expected to continue its lackluster performance as the credit crunch has escalated under the growing threat of bad debt, according to Credit Suisse First Boston Ltd's latest report released last week.
The Swiss brokerage maintained its underweight rating for Taiwan's banking sector.
"The cash-advance card market has entered the darkest hours of the current cycle, when the accelerating loan contraction and rising charge-offs will make the charge-off ratio increase more rapidly," said Sherry Lin (
"Charge-offs" refer to accounts receivable that are unlikely to be collected and will be written off. They are categorized as a company's expenses that reduce net income.
Credit card lending also contracted slightly in December, the first time in three quarters, as banks turned more cautious after lawmakers threatened to cap the interest rate spread at 10 percent in an attempt to help bail credit and cash borrowers out of their mounting debts, Lin said.
As of the end of last year, cash card loans shrank by 3.1 percent month-on-month to NT$298 billion (US$9.3 billion), while gross charge-offs soared by 22 percent from the previous month, according to the Banking Bureau's figures.
Meanwhile, the credit card revolving credit balance slid marginally by 0.1 percent from a month earlier to NT$495 billion while charge-offs increased by 12 percent over the same period.
As the 90-day delinquency and coverage ratios remained broadly flat, new formation of bad debts continued to worsen, which could make the first quarter of this year a critical period after banks have started to reschedule loans more systematically, Lin said.
Similarly, Goldman Sachs said last month that they still expected to see lackluster macro fundamentals and little in the way of concrete catalysts in the immediate future, as consumer credit problems continue to worsen.
However, they said they would not be surprised to see a short-term rebound in banking shares to reflect investor profit-taking and the perception of relative safety following a long underperformance, Goldman Sachs analyst Martin Printz said.
Goldman Sachs gave the nation's banking sector a neutral rating. The US brokerage liked SinoPac Financial Holding Co (
Financial and steel stocks led the TAIEX to advance last Friday, the first trading day after the eight-day Lunar New Year break. The financial sub-index jumped 26.42 points, or 2.97 percent, and the steel index rose 6.61 percent.
UBS Securities Ltd Taiwan branch expected bad debt to ease off in the first half of this year, which would see the banking sector returning to normal in the second half of the year, according to its latest report released last week.
An upside of 25-percent in the financial sub-index can be expected in the future on the strength of a 5-percent dividend yield, a 13-percent return on equity and 3-percent annual growth, UBS Securities head of Taiwan research Ken Chen (
Chen recommended Chinatrust Financial Holding Co (
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by