Taiwanese banks’ credit exposure to domestic flat-panel makers is too high because these loans account for more than 20 percent of the lenders’ overall net worth, Fitch Ratings said yesterday.
“TFT-LCD makers ranked the highest in terms of the banks’ exposure to mono-line subsectors, with the top three players’ outstanding loans totaling 2.3 percent of the system’s loans,” Jonathan Lee (李信佳), senior director of Fitch Taiwan’s financial institutions team, told a media briefing.
The viability of display panel makers, which are highly sensitive to global business cyclicality, has a bearing on the banks’ credit profiles, Lee said.
Chimei Innolux Corp (奇美電子) and AU Optronics Corp (AUO, 友達光電), the nation’s largest and second--largest LCD panel makers, owe NT$309.1 billion (US$10.64 billion) and NT$128 billion in bank loans — 14.4 percent and 6 percent of the entire banking sector’s equity respectively, Lee said, adding a ratio higher than 10 percent is considered risky.
Chimei posted a loss of NT$13.01 billion in the second quarter.AUO posted a loss of NT$10.77 billion.
With Chunghwa Picture Tubes Ltd (中華映管), the three firms have outstanding loans equal to 2.3 percent of all system loans, Fitch said.
However, there is no imminent default risk from any of the three given their cash flows, it said.