The newly passed luxury tax on property transactions has prompted Singaporean lender DBS Bank (星展銀行) to revise downward its growth estimate for mortgage lending this year and to place more emphasis on auto and personal loans instead, company executives said yesterday.
The largest lender in Southeast Asia by assets aims to double its earnings ability this year after posting a loss of NT$5 million (US$172,700) last year, said Jerry Chen (陳亮丞), general manager and head of DBS Bank Taiwan.
“We now expect a net increase of NT$1 billion to NT$1.2 billion in mortgage lending a month, from a previous forecast of NT$1.4 billion to NT$1.5 billion, after the luxury tax slashed home transactions by 30 percent in March,” Chen said.
The bank, which integrated Taiwan’s Bowa Bank (寶華銀行) into its operations in May 2008 after acquiring its positive bank assets, relaunched home loan operations in 2009, Chen said.
Home loans totaled NT$35 billion last year and are expected to expand to NT$50 billion this year, slowing from NT$53 billion last forecast, Chen said.
“The enactment [last week] of the luxury tax will weaken mortgage lending as evidenced by falling property transactions,” he said. “However, we support the government’s effort to cool the property market.”
The tax, which is slated to take effect on June 1, subjects properties resold within two years of purchase to a 10 percent tax. The rate will climb to 15 percent of trading prices if the properties are sold within one year of purchase.
The lender plans to strengthen car loans and roll out personal loans in June to make up for the expected slowdown in mortgage lending, Chen said.
Kevin Tang (唐正峰), managing director and head of consumer banking, expects auto loans to grow 1.5 times this year from the year-earlier level as the market -remains largely untapped.
The luxury tax, which will also impose a 10 percent levy on imported cars with a price tag of NT$3 million and more, will not have much impact on car sales in light of sales figures, Tang said.
Further, DBS Taiwan intends to move the launch of personal loans ahead and backburner credit card business because the latter entails higher risk, he said.
Regardless, the lender will press ahead with its plan to set up a subsidiary in Taiwan at the end of September and expects to gain regulatory approval next month.
To that end, the Singaporean parent has wired NT$2 billion to Taiwan and will inject an extra NT$8 billion next month, according to Chen.
A banking subsidiary must maintain at least NT$10 billion in working capital, as required of all domestic lenders, and is subject to regular stress tests by the Financial Supervisory Commission (FSC).
DBS, which aspires to become one of the top three foreign banks in Taiwan, will relocate its Taipei headquarters to the city’s prime Xinyi District (信義) from suburb Neihu (內湖) next month, Chen said.
The bank had a bad loan ratio of 0.76 percent as of the end of February, while pre-tax profits stood at NT$226 million, FSC data showed.
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