The nation's unprecedented consumer bad loan problem is expected to start easing off in the second half of the year following the speedy efforts of banks to tighten their lending policies and write off bad loans, Fitch Ratings Taiwan said yesterday.
The quality of Taiwan's unsecured consumer lending deteriorated sharply in the second half of last year due to excessive competition, with the charge-off ratio on credit and cash-advance cards doubling from a 6-percent annual rate to a 12 to 15 percent rate by the end of last year.
A charge-off ratio refers to the total amount of bad debt written off during a period as a percentage of the total credit or cash card receivables at the end of that period.
"Card debts peaked in the fourth and first quarters but now the problem has been kept under control," said Jonathan Lee (
The total revolving credit balance for credit cards decreased for the second straight month in January, falling by 0.26 percent to NT$493.4 billion (US$15.17 billion). At the same time, the cash-card lending balance slid for a fourth month, shrinking by 3.12 percent to NT$298.2 billion, according to the Financial Supervisory Commission's latest statistics.
"If there's no `moral hazard' occurring among retail borrowers when the government pushes forth debt restructuring schemes and plans amendments to the bankruptcy law, banks' profitability is expected to return to the normal level next year," he added.
Most banks will still see their profits compressed this year from the consumer loan fallout.
Although many have warned that Taiwan might repeat South Korea's credit card debacle, Lee expressed optimism, citing the small scale of card loans compared with overall lending. Currently, debts incurred from credit and cash cards account for less than 5 percent of the total lending of NT$17 trillion in the financial market.
Even if banks choose to write off the unsecured loans altogether, the overall delinquency ratio would merely top 7 percent by adding the general non-performing loan (NPL) ratio of 2.5 percent -- still much lower than the 12-percent default ratio Taiwan suffered in 2002, he noted.
"Taiwan's situation is, in substance, quite stable and there's little probability of a `storm' taking shape. But the financial regulator and banking operators should strengthen supervision and risk management capability to ensure a healthy environment," he said.
Although the government has presented a card-debt negotiation mechanism to help debtors, many have adopted a wait-and-see attitude, naively thinking that there might be more favorable bailout measures or that a new version of the bankruptcy law will serve as their panacea.
Lee warned that Taiwan must be well prepared to implement the draft consumer debt clean-up bill, which DPP Legislator Jerry Tsai (
Hong Kong amended its bankruptcy law in 1998 and had seen the number of bankruptcy filings surge from dozens to several thousands of cases a day, leaving the judicial authorities incapable of handling the situation.
Lee said that the government must determine whether its judicial system is staffed with a sufficient number of professionals, and map out ways to avoid moral hazard while upholding justice and equity.
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
Nvidia Corp’s demand for advanced packaging from Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) remains strong though the kind of technology it needs is changing, Nvidia CEO Jensen Huang (黃仁勳) said yesterday, after he was asked whether the company was cutting orders. Nvidia’s most advanced artificial intelligence (AI) chip, Blackwell, consists of multiple chips glued together using a complex chip-on-wafer-on-substrate (CoWoS) advanced packaging technology offered by TSMC, Nvidia’s main contract chipmaker. “As we move into Blackwell, we will use largely CoWoS-L. Of course, we’re still manufacturing Hopper, and Hopper will use CowoS-S. We will also transition the CoWoS-S capacity to CoWos-L,” Huang said
VERTICAL INTEGRATION: The US fabless company’s acquisition of the data center manufacturer would not affect market competition, the Fair Trade Commission said The Fair Trade Commission has approved Advanced Micro Devices Inc’s (AMD) bid to fully acquire ZT International Group Inc for US$4.9 billion, saying it would not hamper market competition. As AMD is a fabless company that designs central processing units (CPUs) used in consumer electronics and servers, while ZT is a data center manufacturer, the vertical integration would not affect market competition, the commission said in a statement yesterday. ZT counts hyperscalers such as Microsoft Corp, Amazon.com Inc and Google among its major clients and plays a minor role in deciding the specifications of data centers, given the strong bargaining power of
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
RSS