Loan growth has slumped this year, undermined by a weakening economic climate that has reduced demand for funds, according to the Financial Supervisory Commission (FSC).
New loans given by Taiwan’s banking sector in the first eight months of the year totaled only NT$409.2 billion (US$12.46 billion), less than half of the NT$925.4 billion in new loans given during the same period of last year, commission statistics showed.
The weak loan demand reflected corporations’ reluctance to borrow and invest amid an unfavorable economic environment and a desire by some companies to deleverage their balance sheets by repaying debt rather than taking more on, the commission said.
In mid-August, the government trimmed its forecast for the nation’s economic growth this year to 1.56 percent from a previous estimate of 3.28 percent.
Several economic think tanks now believe the nation’s growth is likely to fall below 1 percent, because of falling global demand.
As of the end of August, outstanding bank loans in Taiwan totaled NT$25.33 trillion, up NT$127.9 billion from the end of July, data showed.
In the eight-month period, outstanding bank loans to the private sector grew 1.61 percent from a year earlier, far below the 5.72 percent increase recorded during the same period last year, further signaling the impact of the economic slowdown on funds demand, the commission said.
The commission said new loans extended to small and medium-sized enterprises during the first eight months totaled NT$198.5 billion, accounting for 55.14 percent of this year’s NT$360 billion target set by the government.
The commission said that as fund demand is likely to pick up in the October-to-December quarter, a traditional peak season for business operations, it remained optimistic that the NT$360 billion target can be achieved.
As of the end of August, outstanding non-performing loans (NPL) in the local banking sector totaled NT$64.5 billion, up NT$1.1 billion from a month earlier, with the average NPL ratio at 0.25 percent, little changed from the end of July, the commission said.
The commission said the NPL ratio was below 2 percent for all 39 banks registered in Taiwan.
Meanwhile, the local banking sector’s branches in China posted NT$850 million in losses in August, its first-ever loss since Taiwanese banks opened branches in China in December 2010, the commission said.
The commission attributed the monthly losses to a sharp depreciation of yuan against the US dollar and less earnings contributions from banks’ financial derivative business.
Overall, Taiwanese banks posted NT$24.88 billion in pre-tax profit in August, down 5.8 percent from a year earlier. In the first eight months of this year, they reported NT$223.43 billion in pre-tax profit, down 4.7 percent from a year earlier, the commission said.
In the eight-month period, Taiwanese banks’ offshore banking units (OBUs) posted NT$54.57 billion in pre-tax profit, down 11.7 percent from a year earlier, while their branches in China suffered a sharper 30.5 percent year-on-year decline in pre-tax profit, which stood at NT$1.68 billion, the commission said.
Despite the fall in profit posted by their OBUs, these offshore operations remained one of the major sources of profit for many Taiwanese banks.
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