The aggressive expansion of local banks has turned the rapidly ballooning housing mortgage segment into the next risk area for the nation's troubled banking sector, Macquarie Research said.
"For us, the overarching concern is no longer unsecured consumer lending, but rather than the mortgage space, an area where banks have been aggressively expanding as they seek to replace unsecured consumer loans as a growth driver," Chris Hunt, Macquarie's head of Taiwan equities research, said in a research note last week.
Even a moderate uptick in credit costs could impair the already meager profitability of housing mortgage, Hunt said.
Despite a slim possibility of a mortgage bad loan blowout, "we do perceive some risks," Hunt said, especially for new mortgage loans that were issued to speculators before the appropriate value assessments had been made.
Following the consumer credit abuse storm, local banks rediscovered the secured housing mortgage business and jumped into the segment in droves, driving the aggregate mortgage lending close to its regulatory upper limit of 30 percent of the total deposit balance and outstanding financial debts.
Despite requests by banks that the cap be lifted, the Financial Supervisory Commission did not budge, mostly over concerns of concentrated risk.
Instead, it asked banks to securitize their mortgage lending portfolios for more leeway.
Taiwan Cooperative Bank (
Taiwan Ratings Corp (中華信評), a local arm of Standard & Poor's Ratings Services, said last week it did not expect a hard landing for the nation's fast growing mortgage business as the red-hot property market showed no sign of a sudden turnaround in the short run.
However, prudence remained of the essence as a delayed negative effect would likely break out when the economy enters its downtrend, as has been the case in the US and Hong Kong, Taiwan Ratings said.
Macquarie Securities retained its "underweight" rating on local banks and banking-centric financial holding firms, citing several concerns including continued margin pressure under severe competition, the consumer credit crisis, a shortage in replacement growth drivers, unsustainable fee-based income, demand for offshore products, modest profitability, a lack of hoped-for consolidation and more flexibility for banks wishing to expand in China in the next year.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to