New mergers led by state-controlled banks will help the banking sector solve its “over-banking” problem and further enhance profitability, Moody’s Investors Service said yesterday.
However, the government may not launch any meaningful mergers before the presidential election next year, Moody’s said.
“The current banking sector has the structural problem of over-banking that makes companies compete excessively, further declining their pricing on products and influencing down their profits,” Sally Yim (嚴溢敏), a Moody’s vice president and senior analyst for financial institutions in the Asia-Pacific region, said in Taipei.
The appropriate consolidation could solve this problem, Yim said, adding that there was a case to be made for state-controlled banks with higher market shares taking over smaller state banks to create better synergies.
Mergers led by three major financial holding companies in Taiwan — Cathay Financial Holdings Co (國泰金控), Chinatrust Financial Holding Co (中信金控) and Fubon Financial Holding Co (富邦金控) — help as well, but may not make meaningful changes to the banking sector’s structure, Yim said.
Other than the slow pace of consolidation that makes the profitability of local banks consistently weaker compared with their peers, the high single-borrower concentration would be the other main concern, according to the ratings agency’s report.
For example, ProMOS Technologies Inc’s (茂德科技) debt problems may increase the risk exposure to its bank creditors and lead to fluctuations in their earnings, Yim said. However, this year’s relative high spread may offset the negative impact from ProMOS Technologies, she said.
Moody’s maintained its “stable” industry outlook on Taiwan’s banking system amid good asset quality, earnings diversification from wealth management products, strong liquidity and limited reliance on wholesale funding, as well as high probability of government support.
Yim said small and medium-sizedenterprise (SME) lending would retain its growing pace to become the banking sector’s major driver for this year, as state-owned banks continue to lend support to these enterprises amid the government’s supporting strategy.
As for the nation’s insurance sector, Moody’s offered a “stable” outlook on the non-life insurance sector, but gave a “negative” outlook on the life insurance sector amid structural problems resulting for differences in interest rate.
“Since life insurance companies sold a lot of insurance policies at a high interest rate — 8 to 9 percent — in the 1990s, it is difficult for them to solve the structural problem of losses from the differences in interest rates in the short term, compared with current interest rates of about 2 percent,” Yim said.
Despite the central bank’s gradual rate hikes over the past year, Yim expects the problem will not be solved until 2020 at the earliest.
WEAKER ACTIVITY: The sharpest deterioration was seen in the electronics and optical components sector, with the production index falling 13.2 points to 44.5 Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said. “Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference. Firms across the supply chain are also lowering stock levels to mitigate
Six Taiwanese companies, including contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), made the 2025 Fortune Global 500 list of the world’s largest firms by revenue. In a report published by New York-based Fortune magazine on Tuesday, Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), ranked highest among Taiwanese firms, placing 28th with revenue of US$213.69 billion. Up 60 spots from last year, TSMC rose to No. 126 with US$90.16 billion in revenue, followed by Quanta Computer Inc (廣達) at 348th, Pegatron Corp (和碩) at 461st, CPC Corp, Taiwan (台灣中油) at 494th and Wistron Corp (緯創) at
NEW PRODUCTS: MediaTek plans to roll out new products this quarter, including a flagship mobile phone chip and a GB10 chip that it is codeveloping with Nvidia Corp MediaTek Inc (聯發科) yesterday projected that revenue this quarter would dip by 7 to 13 percent to between NT$130.1 billion and NT$140 billion (US$4.38 billion and US$4.71 billion), compared with NT$150.37 billion last quarter, which it attributed to subdued front-loading demand and unfavorable foreign exchange rates. The Hsinchu-based chip designer said that the forecast factored in the negative effects of an estimated 6 percent appreciation of the New Taiwan dollar against the greenback. “As some demand has been pulled into the first half of the year and resulted in a different quarterly pattern, we expect the third quarter revenue to decline sequentially,”
ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip assembly and testing service provider, yesterday said it would boost equipment capital expenditure by up to 16 percent for this year to cope with strong customer demand for artificial intelligence (AI) applications. Aside from AI, a growing demand for semiconductors used in the automotive and industrial sectors is to drive ASE’s capacity next year, the Kaohsiung-based company said. “We do see the disparity between AI and other general sectors, and that pretty much aligns the scenario in the first half of this year,” ASE chief operating officer Tien Wu (吳田玉) told an
RSS