As a result of smaller investment returns amid the global financial crisis, the central bank estimates that its profit will total NT$157 billion (US$4.72 billion) next year, marking a six-year low, bank Governor Perng Fai-nan (彭淮南) says in a report to be delivered to the legislature today.
In the past six years, the central bank has contributed more than NT$160 billion every year to the treasury, with the exception of 2003, when it only made NT$140 billion in profits.
The central bank’s warning will increase the burden on the treasury as the state-owned oil refinery and electric power utility are facing tremendous losses this year.
As of the end of last month, central bank profit reached NT$176.9 billion, surpassing its original target by more than 30 percent.
Adding accumulated earnings from foreign-exchange reserves and other investments, it is estimated that the treasury will receive NT$167.3 billion in profit from the central bank this year, the central bank report shows.
The central bank said profitability growth was mainly driven by increased volume of foreign exchange trading, together with an increase in interest revenue.
However, the central bank also said that this is a difficult year to make money, as the US federal funds rate has fallen to 1 percent, and US Treasury bonds only yielded between 0.44 percent and 0.92 percent.
Furthermore, the overall yield on foreign exchange is lower than the 3.6 percent that the central bank originally projected, the report shows.
As a result, the central bank will be more conservative on its profit outlook next year, projecting just NT$121.3 billion.
By adding accumulated profit, the amount estimated to remit to the treasury will reach NT$157 billion, the first time in six years that the amount would fall below NT$160 billion.
Meanwhile, the central bank has been keeping a close watch on banks that are providing fewer loans as part of the government’s initiatives to make it easier for businesses to obtain loans from financial institutions.
The Cabinet is providing three mechanisms, including bailout, the Credit Guarantee Fund and the National Development Fund, to help businesses raise capital.
These mechanisms include the NT$600 billion to be loaned by banking institutions to help businesses overcome their financial difficulties.
Loans made by Hua Nan Commercial Bank (華南銀行) last month were NT$20 billion down on a year earlier, an amount that raised the concerns of the central bank.