The nation’s banks need to win the business of clients based overseas if they intend to grow into regional players, Moody’s Investors Service yesterday said in Taipei.
All overseas branches of Taiwanese banks focus their services on Taiwanese firms, limiting their client pools and earnings, it said.
“It is not enough to only serve the domestic market,” Hong Kong-based senior credit officer at Moody’s Sally Yim (嚴溢敏) told a media briefing in Taipei.
Multinational banking giants like DBS Bank, Standard Chartered Bank, HSBC Bank and Citibank have made inroads into foreign markets in terms of retail and wholesale banking.
Taiwanese banks need to develop a successful strategy to make their effors in the overseas market serious and sustainable, Yim said.
Unfortunately, Taiwanese banks are competing for the same clients in foreign markets as they do in Taiwan, overcrowding the domestic market and depressing interest margins, she said.
Development restrictions imposed by foreign markets add to to difficulties experienced by banks trying to expand their overseas business, said Christine Kuo (郭書岑), another senior credit officer at Moody’s.
Countries like Thailand do not allow foreign investors to own a majority stake in banks there, and other foreign regulators try to protect their markets by limiting openings and slowing the review of new business applications, Kuo said.
The nation’s banks also need to improve their capital adequacy ratios before embarking on expansion, Yim said.
Consolidation among domestic financial institutions is both desirable and practical if the government demonstrates it has the resolve to help remove barriers, especially protest from unions, Yim said, as state-run banks account for more than 50 percent of the sector’s assets.
“We believe matches between state-run and private banks could generate better synergy judging from the former’s strength at corporate banking and the latter’s prowess at consumer banking,” she said.
The nation’s banks might see non-performing loans rise going forward as domestically listed companies in the TFT-LCD panel and solar-energy industries have reported losses since 2011 and more than half of them have reported insufficient earnings to cover their interest expenses for the past two years, a Moody’s report said.
Overall, the profitability of the banking industry is improving despite downside risks and low profit margins, Yim said.
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