Taiwanese banks’ loan books grew to a record NT$29.2 trillion (US$940.4 billion) as of the end of May, up NT$230.5 billion from the end of April, statistics released this month by the Financial Supervisory Commission showed.
That was the third straight month of growth and was faster than increases of NT$52.7 billion and NT$106.9 billion in the previous two months, the data showed.
Compared with the beginning of this year, combined loans by the nation’s 37 local banks expanded NT$357.6 billion, driven mainly by corporate demand for working capital, the commission said.
Despite the increase, local banks’ asset quality remained “benign,” reporting a combined NT$70.2 billion in nonperforming loans as of the end of May, a monthly decrease of NT$1.7 billion. The nonperforming loans ratio was 0.24 percent, down 0.01 percentage points from a month earlier and down 0.03 percentage points from a year earlier, the data showed.
The overall coverage ratio — the loans covered by banks’ provisions, which indicates the sufficiency of bad-loan reserves — was 572.99 percent in May, up from 556.6 percent in April, which the commission said reflected banks’ intention to maintain high bad-debt provisions.
As the government pushes Taiwanese businesses with overseas operations to return home, funds for corporate customers is expected to increase, the commission said.
As of Friday, the Ministry of Economic Affairs’ three-year plan to encourage Taiwanese businesses to return had 93 approved applications this year, with about NT$452 billion in pledged investments.
To encourage returning Taiwanese businesses to build plants and purchase manufacturing equipment, the National Development Fund has promised to subsidize 0.5 percent of bank commissions if the firms borrow less than NT$2 billion, 0.3 percent for businesses borrowing NT$2 billion to NT$10 billion and 0.1 percent for those borrowing more than NT$10 billion.
Even though the central bank has kept benchmark interest rates unchanged since September 2016, local banks’ lending momentum is likely to remain steady for an extended period as they vie for business from returning Taiwanese firms, which bodes well for profitability, the commission said.
In April, Moody’s Investors Service said it expected stable loan growth of about 5 percent for Taiwanese banks this year, compared with loan growth of 5.1 percent last year and 4.7 percent in 2017.
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