With lingering interest margin contraction pressure and disadvantageous government restrictions, profitability in the local banking sector will improve this year, but remains weak in comparison with regional peers and its own past record, Fitch Ratings Ltd said yesterday.
Despite an improvement in profits from last year, "there is still a long way [for Taiwan's banking industry] to go back to normal," Jonathan Lee (李信佳), director of financial institutions at Fitch Ratings' Taipei branch, told a media briefing for its release of a report on Taiwan's banking sector yesterday.
Fitch expected overall return-on-equity (ROE) to rise to 4 percent to 5 percent this year from minus 0.41 percentage points last year. It also forecast the loss ratio of credit and cash card lending would drop to around 15 percent this year.
The nation's banking sector had produced an ROE of 8 percent to 10 percent from 2003 to 2005 before encountering the consumer debt problem last year. Taiwan's ROE performance compares with Hong Kong's 10 percent and China's 5 percent.
Last year, negative rating actions largely outnumbered positive ones after factoring in increasingly tougher liquidity conditions, particularly on small banks, rising funding costs amid an inverted yield curve, continued cutthroat price wars and lingering adverse effects from mounting defaulted unsecured loans.
The local banking sector has written off NT$230 billion (US$7.02 billion) in defaulted loans, or 1.35 percent of the net income, which ate into the bulk of the 1.5 percent net interest margin, Lee said.
Write-offs could decrease to between NT$150 billion and NT$200 billion this year as the bad consumer loan storm eases off, Lee said.
As banks move to develop wealth management businesses, the competitive advantage is mostly restricted to large, branded banks, like Taipei Fubon bank (台北富邦銀行) and Chinatrust Commercial Bank (中國信託商銀), the analyst said.
Small lenders would need fund injection as soon as possible or could be weeded out from the market next year, Lee said.
Foreign rivals are in aggressive expansion mode in the local market through acquisition, and Fitch said this has changed the competition structure for local banks.
Foreign banks like Standard Chartered Bank and Citibank can offer integrated services through their platform in Hong Kong and China, while local banks have one hand tied behind their back.
Government restrictions that ban Taiwanese lenders from expanding in China have put them in an adverse position to compete with multinational rivals, Lee said.
Global shipments of PCs, tablets and mobile phones this year are expected to decline 13.6 percent year-on-year to 1.9 billion units, US market research firm Gartner Inc said in a report yesterday. While PC shipments are forecast to fall 10.5 percent to 235.19 million from 262.71 million last year, the contraction in the overall PC market could have been much more severe, Gartner said. “Government lockdowns due to COVID-19 forced businesses and schools to enable millions of people to work from home and increase spending on new notebooks, Chromebooks and tablets,” Gartner senior research director Ranjit Atwal said. Shipments of tablets and Chromebooks
The Financial Supervisory Commission (FSC) has deferred the implementation of the Basel III standards and capital requirements for “domestic systemically important banks” to ease their capital pressure so they can concentrate on helping businesses affected by the COVID-19 pandemic, FSC Chairman Thomas Huang (黃天牧) said yesterday. The Basel III standards were set by the Basel Committee on Banking Supervision (BCBS) and were originally to take effect on Jan. 1, 2022. They have stricter capital requirements and adopt different approaches to calculating risks. However, the implementation of the standards would be delayed by one year in line with the revised timeline announced by
Phoenix Silicon International Corp (昇陽半導體) yesterday said strong demand from customers means it would maintain its capacity expansion plan for this year. The silicon wafer recycler, which counts Taiwan Semiconductor Manufacturing Co (台積電) among its major customers, next quarter plans to add a capacity of 60,000 12-inch wafers per month, bringing its total capacity to 300,000 wafers a month. “Phoenix Silicon is enhancing its smart manufacturing capabilities and actively expanding 12-inch capacity at an existing fab to satisfy customer demand,” Phoenix chairman Mike Yang (楊聰敏) said in the firm’s annual report. Phoenix is also evaluating the feasibility of building a second fab
FLAMBOYANT: Stanley Ho, who was married four times and had 17 known children, developed the junket VIP system and was loved by Macanese for his philanthropy Macau gambling king Stanley Ho (何鴻燊), who built a business empire from scratch in the former Portuguese colony and became one of Asia’s richest men, died yesterday at the age of 98. The flamboyant tycoon, who loved to dance, and advised his nearest and dearest to shun gambling, headed one of the world’s most lucrative gaming businesses through his flagship firm, SJM Holdings Ltd (澳門博彩控), valued at about US$6 billion. Shielded from challengers by a four-decade monopoly on gambling, Ho helped transform Macau from a sleepy peninsula dotted with seedy, windowless gambling dens into the world’s biggest casino center. However, Ho’s interests in