The earnings momentum of Taiwanese banks has tapered off this year due to China’s slowing economy and yuan devaluation, CIMB Securities Ltd said on Tuesday.
Overseas earnings, which drive 35 percent of local banks’ pretax profits, might not see a hefty increase this year as in previous years, as banks have turned cautious about their lending operations in China, Malaysia-based CIMB said in a report.
Offshore banking units (OBUs) have become a particularly important earnings driver since 2011, when authorities allowed them to operate yuan business in the wake of improved cross-strait relations, the report said. Many lenders have also benefited from the yuan’s appreciation.
The cautious sentiment is reflected in the 8 percent contraction in yuan lending for the first eight months of the year and a 2 percent decline in foreign currency-based loans, the report said.
OBUs generate about 65 to 75 percent of banks’ overseas earnings, or up to 25 percent of their total profits, the report said.
As of last month, 13 Taiwanese banks had set up 52 outlets in China.
“We expect the conservative sentiment to persist given uncertainties over the global economy and the slowdown in China,” CIMB analyst Nora Hou (侯乃鳳) said in the report.
Overseas earnings’ contribution rose to 42 percent of the sector’s total pretax profit in the first quarter of last year, Hou said.
Taiwanese regulators have introduced measures to rein in underlying risks, bringing down the sector’s exposure to 62 percent of total net worth, from a peak of 69 percent in the third quarter of last year, the report said.
With the Democratic Progressive Party widely expected to win the Jan. 16 presidential election, the pace of cross-strait exchanges might slow and local banks’ overseas expansion might lose steam, CIMB said, while taking a neutral stance on local financial shares.
Taiwan’s technology protection rules prohibits Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) from producing 2-nanometer chips abroad, so the company must keep its most cutting-edge technology at home, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. Kuo made the remarks in response to concerns that TSMC might be forced to produce advanced 2-nanometer chips at its fabs in Arizona ahead of schedule after former US president Donald Trump was re-elected as the next US president on Tuesday. “Since Taiwan has related regulations to protect its own technologies, TSMC cannot produce 2-nanometer chips overseas currently,” Kuo said at a meeting of the legislature’s
TECH WAR CONTINUES: The suspension of TSMC AI chips and GPUs would be a heavy blow to China’s chip designers and would affect its competitive edge Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, is reportedly to halt supply of artificial intelligence (AI) chips and graphics processing units (GPUs) made on 7-nanometer or more advanced process technologies from next week in order to comply with US Department of Commerce rules. TSMC has sent e-mails to its Chinese AI customers, informing them about the suspension starting on Monday, Chinese online news outlet Ijiwei.com (愛集微) reported yesterday. The US Department of Commerce has not formally unveiled further semiconductor measures against China yet. “TSMC does not comment on market rumors. TSMC is a law-abiding company and we are
Semiconductor shares in China surged yesterday after Reuters reported the US had ordered chipmaking giant Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to halt shipments of advanced chips to Chinese customers, which investors believe could accelerate Beijing’s self-reliance efforts. TSMC yesterday started to suspend shipments of certain sophisticated chips to some Chinese clients after receiving a letter from the US Department of Commerce imposing export restrictions on those products, Reuters reported on Sunday, citing an unnamed source. The US imposed export restrictions on TSMC’s 7-nanometer or more advanced designs, Reuters reported. Investors figured that would encourage authorities to support China’s industry and bought shares
FLEXIBLE: Taiwan can develop its own ground station equipment, and has highly competitive manufacturers and suppliers with diversified production, the MOEA said The Ministry of Economic Affairs (MOEA) yesterday disputed reports that suppliers to US-based Space Exploration Technologies Corp (SpaceX) had been asked to move production out of Taiwan. Reuters had reported on Tuesday last week that Elon Musk-owned SpaceX had asked their manufacturers to produce outside of Taiwan given geopolitical risks and that at least one Taiwanese supplier had been pushed to relocate production to Vietnam. SpaceX’s requests place a renewed focus on the contentious relationship Musk has had with Taiwan, especially after he said last year that Taiwan is an “integral part” of China, sparking sharp criticism from Taiwanese authorities. The ministry said