Thu, Aug 17, 2006 - Page 12 News List

Banks weighed down by card abuse

By Amber Chung  /  STAFF REPORTER

Local banks saw profits shrink by over 50 percent in the first half of this year compared to a year ago on mounting defaulted consumer loans, according to government data.

Pre-tax income of 44 lenders totaled NT$36 billion (US$1.1 billion) in the January to June period, down 57 percent from NT$839 billion a year earlier, the Financial Supervisory Commission's latest statistics showed.

Consequently, the banks' average return on equity dropped to 2.12 percent from 4.81 percent, while return on assets weakened to 0.13 percent from 0.3 percent over the same period, the data showed.

Consumer bad debts from credit and cash card abuse set alarm bells ringing around the middle of last year. The problem has seriously dented local lenders' profitability, which has in turn led to a slowdown in consumption after credit tightening by banks.

Chinatrust Financial Holding Co (中信金控), for instance, saw a net loss of NT$2.25 billion in the first six months, compared with earnings of NT$9.83 billion a year ago.

Foreign banks performed no better than their local rivals, with pre-tax income of 33 foreign lenders in Taiwan falling 63.5 percent year-on-year to NT$3.83 billion in the first half, the statistics showed.

HSBC Ltd Taiwan saw a loss of NT$1.62 billion, while ABN AMRO Bank Taiwan incurred a deficit of NT$780 million.

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