In an environment where interest rates have been trending lower, Taiwan’s banking sector is expected to face more challenges and see its profitability weaken this year, according to Taiwan Ratings Corp (中華信評), a local partner of US-based Standard & Poor’s Financial Services LLP.
To boost the economy, the central bank cut key interest rates twice late last year, which is expected to exacerbate pressure on the banking sector’s interest spreads this year and hurt its bottom line, the ratings agency said.
Last year, Taiwan’s economy grew only 0.75 percent from a year earlier, compared with a year-on-year increase of 3.92 percent in 2014, after contracting 0.80 percent and 0.52 percent in the third and fourth quarters respectively.
Economic weakness prompted the central bank to lower interest rates starting from the third quarter of last year, with the discount rate at 1.625 percent.
In addition to the unfavorably low interest rates, Taiwan Ratings said that the banking sector has also been affected by rising competition and higher credit costs.
“Taiwan’s tepid economic growth and a rise in credit costs from recent lows could further squeeze the sector’s narrow profit margins over the next 12 months,” Taiwan Ratings credit analyst Eva Chou (周怡華) said in a statement.
“That is despite a modest improvement in the sector’s earnings over the past five years under a favorable credit environment and higher interest spreads from banks’ overseas expansions,” Chou said.
Taiwan Ratings said that a plunge in Taiwan’s exports last year had worsened economic fundamentals and increased pressure on the banking sector. Amid falling global demand, Taiwan’s exports fell 10.6 percent to US$280.48 billion last year and outbound sales for last month continued to fall, down by 13 percent year-on-year to US$22.2 billion.
The agency said that Taiwanese banks have faced other challenges from tightening financial regulations, low market sentiment and volatility in the real-estate market.
It said that the banking sector’s exposure to China also negatively affected earnings.
Despite the challenges encountered by Taiwanese lenders, “we consider banks in general to have adequate capitalization and abundant liquidity for the next 12 months,” Chou said.
“This supports our view of a stable credit outlook for Taiwan’s banking sector,” the analyst added.
Taiwan Ratings said that the outlook for the banking sector remains stable.
SHARES DOWN: The top 10 companies all decreased in market value last year, due to COVID-19, Russia’s invasion of Ukraine, rising interest rates and global inflation Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) retained the top spot among the largest companies in the Asian supply chain in terms of market capitalization, Digitimes Research said. Citing its Asia Supply Chain Market Cap 100 rankings for last year, the research firm last week said TSMC’s market cap was US$378.45 billion, the highest among Asian suppliers, although it dropped by nearly US$200 billion during the year. The 34.3 percent fall in TSMC’s market cap was the largest decline of any company in the survey last year, but was typical of how many top-ranking companies fared. The top 10 in Digitimes’ rankings all saw
Sex worker Nina relies on an apartment in the Turkish city of Istanbul as a relatively safe space to meet clients, but the 29-year-old is worried about making enough to cover the rent after the landlord doubled the price. As a surge in inflation fuels a housing crisis in Turkey, LGBTQ+ sex workers like Nina say landlords are forcing them to accept huge rent hikes for fear of being evicted. Nina, who uses the pronouns they and them, worries about how they will pay the increased monthly rent of 8,000 Turkish lira (US$425.11) on top of rising bills. “There are gas, electricity, water,
Singapore is seeing an influx of ultra-wealthy families from China looking to protect their wealth from a government that increasingly views them with suspicion. The Chinese Communist Party’s recent crackdowns on tech billionaires and tax-shy celebrities, as well as three years of “zero COVID” policies, have led many rich Chinese to look for a safe haven. Nervous over the fate of their fortunes, some of the country’s mega-rich have since booked tickets to Singapore, insiders said. The key Asian financial hub ticks all the boxes for relocating tycoons. Singapore has been ruled by one party for the past six decades, and labor strikes and
Samsung Electronics Co has begun making its fold and flip smartphones as well as its latest Galaxy S23 flagship in India, renewing its focus on a key growth market where Chinese devices have eaten into its sales. The South Korean giant’s Indian unit previously imported some of its premium flip and fold devices into the world’s second-biggest smartphone market, but it is now assembling its entire phone portfolio locally, said Raju Pullan, the head of Samsung’s Indian mobile business. “That also builds on our strong commitment to growing the India market,” Pullan said yesterday, declining to comment on whether the locally assembled