Macroeconomic headwinds are likely to drag growth in lending to small and medium-sized enterprises (SME) to a six-year low, the Financial Supervisory Commission (FSC) said on Thursday.
In the first nine months of this year, SME loans by domestic banks grew to NT$98.9 billion (US$3.14 billion), achieving about 40 percent of the commission’s NT$240 billion target for this year.
That represents the slowest SME loan expansion since 2009, when loan growth was at an anemic NT$66.8 billion because of the global financial crisis, the commission said.
“Economic indicators in recent months have begun to show signs of recovery, which would be helpful in driving SME loan expansion,” Banking Bureau Deputy Director-General Lu Hui-jung (呂蕙容) said.
The commission said that total outstanding loans by domestic banks expanded by NT$91.3 billion in September to NT$25.73 trillion, the second-highest month-on-month increase this year since the NT$192.9 billion expansion in August.
“Of the new loans made in September, about NT$70 billion are classified as corporate working capital, while the remainder are for real-estate purchases,” Lu said, adding that this suggests enterprises have a larger appetite for credit as the economy recovers.
The non-performing loan ratio had stayed relatively stable at 0.29 percent at the end of September, the commission said, with total delinquency at about NT$73.6 billion.
Meanwhile, foreign-exchange volatility and the money-laundering fine imposed on Mega International Commercial Bank (兆豐銀行) have dragged on domestic banks’ operations in overseas markets.
From January to September, the yuan’s weakness against the US dollar caused lenders’ earnings contribution from China to dip by 66.7 percent year-on-year to NT$740 million, while their earnings from other overseas markets dropped 33.5 percent annually to NT$15.93 billion.
“Most Taiwanese banks’ businesses in China are denominated in US dollars and they have been hit hard by the yuan’s depreciation, with many compelled to raise provisions against foreign-exchange exposure,” Lu said.
Overall, banks’ earnings in September rose 9.2 percent month-on-month to NT$23.65 billion due to solid profits from their domestic operations, the commission said.
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