Cathay United Bank (國泰世華銀行), a subsidiary of Cathay Financial Holdings Co (國泰金控), halved its mortgage lending growth forecast for this year in light of the government’s plan to tax speculative property transactions, a senior executive said yesterday.
The lender had forecast a 10 percent increase in mortgage lending this year, on par with overall loan growth, but now expects the figure to drop to 5 percent, if the draft luxury tax bill clears the legislature this session and takes effect on July 1, executive vice president Allen Peng (彭友倫) said.
The government aims to enact a luxury tax that would impose a 10 percent levy on real estate properties resold within two years of purchase. The rate would rise to 15 percent of the transaction price if the property is sold within one year of purchase.
“The tax plan has already weakened demand for new home loans this month,” Peng said. “The impact will become more evident once the bill is passed into law.”
The bank has cut in half its new home loans forecast this year to approximately NT$10 billion (US$338 million), from an earlier estimate of more than NT$20 billion, Peng said.
Last year, mortgage loans expanded 7.49 percent to NT$401.7 billion, from NT$373.7 billion a year earlier, as funds flew to the property market amid limited investment tools.
Mortgage loans took up 44.4 percent of the bank’s total lending last year, while corporate loans accounted for 51.2 percent, company data showed.
The bank was the largest contributor to Cathay Financial’s balance sheet last year as foreign exchange volatility took its toll on the bank’s life insurance arm, Cathay Life Insurance Co (國泰人壽).
The insurer, the nation’s largest by market share, expects a mild growth in first year premiums this year, after a 26.2 percent jump last year to NT$330.1 billion, Lin Chao-ting (林昭廷), a senior vice president at Cathay Life, told an investor conference.
Cathay United Bank aims to achieve a 15 percent increase in pre-tax earnings this year on improving interest and fee incomes amid a stable economic recovery, Peng said.
Net interest margin averaged 1.07 percent last year and is expected to climb 5 to 10 basis points this year, without factoring in interest rate hikes by the central bank, Peng said.
The lender expects total loans to grow 10 percent this year with even demand from big enterprises as well as small and medium-sized firms, Peng said.
He expects a 30 percent increase in unsecured micro-loans amid recovering confidence.
Cathay Financial dropped 1.49 percent to close at NT$43.05 yesterday, compared with the financial sector’s 0.2 percent gain and the main bourse’s 0.5 percent fall.
Brandon Liu (劉恆成), an analyst at Taiwan International Securities Corp (金鼎證券) said the stock would remain weak as long as the local currency gains against the US currency, driving up hedging costs.