The average non-performing loan (NPL) ratio for Taiwanese banks dropped by 0.03 percentage points month-on-month to 1.44 percent at the end of last month, the Financial Supervisory Commission’s latest data showed.
Overall, asset quality in the banking sector has showed a slight improvement in the past few months, with the NPL ratio at 1.63 percent in the first quarter and 1.50 percent in the second quarter, according to a report released by the commission on Thursday night.
Bad loans at the nation’s 37 banks totaled NT$262.3 billion (US$8.097 billion) at the end of last month, a decrease of NT$3.7 billion from July’s NT$266.0 billion, the commission said.
Outstanding loans in the banking sector grew NT$192.3 billion month-on-month to NT$18.26 trillion last month, it said.
Including those at the nation’s postal savings system, the outstanding loans at major Taiwanese financial institutions totaled NT$21.01 trillion at the end of last month, a decline of 0.84 percent from a year earlier and a fall of 0.08 percent from the previous month, central bank data showed on Thursday.
The commission’s latest bad loan data showed that 36 of the 37 banks saw their NPL ratios drop to below 5 percent last month, with 31 of those lower than 2.5 percent.
The commission said it would pay close attention to banks with a much higher bad loan ratio. Chinfon Commercial Bank (慶豐銀行) reported the highest NPL ratio of 14.78 percent at the end of last month.
Moody’s Investors Service said in its annual national sovereign report on Tuesday that if private credit growth in Taiwan remained soft and if local asset markets underwent a sharp downturn, then there would be an increase in non-performing assets in lower-tier lenders, placing more pressure on their capital adequacy ratios.
Meanwhile, Standard & Poor’s Ratings Services said in a report on Monday that Taiwan’s banks posted “mediocre operating results” in the first half of the year under recession conditions and were expected to face continued pressure from thin net interest margins and a volatile economy over the next several quarters.
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