Taiwanese banks’ Chinese branches last month posted pre-tax losses of NT$930 million (US$29.11 million) as they began to write off delinquent loans in China, the Financial Supervisory Commission’s (FSC) Banking Bureau said yesterday.
“A number of banks who have participated in a syndicated loan to troubled China Firstextile Holdings Ltd (中國福斯特紡織) wrote off NT$780 million in delinquent debt last month,” Banking Bureau Deputy Director-General Jean Chiu (邱淑貞) said.
In addition to narrowing net interest margins and foreign exchange losses, Taiwanese banks’ earnings last month were strained by NT$280 million in additional provisions, Chiu added.
“We view banks’ write-off decision positively, as it shows that they are resilient enough to absorb the loss and ensure their long-term viability,” Chiu said.
As a result of the write-off, the banks’ China-related non-performing loan ratio improved from 1 percent as of the end of May to 0.2 percent last month, Chiu said.
She added that banks would continue recovery efforts and that they might have a chance of writing back gains in the future.
Taiwanese banks were also affected by delinquent syndicated loans to another China-based company, Fujian Ultrasonic Shoes Co Ltd (福建索力鞋業).
Both syndicated loans were arranged by Nomura International (Hong Kong) Ltd. Last month, six Taiwanese banks filed a lawsuit in Taiwan against subsidiaries of Nomura Holdings Inc over the loan to Fujian Ultrasonic.
Overall, Taiwanese banks still reported pre-tax profits last month, the bureau’s data showed.
However, their aggregate pre-tax profits dipped 8.79 percent to NT$26.56 billion last month from a year ago, data showed.
Banks’ overseas branches excluding China posted a 25.1 percent jump in pre-tax profits last month to NT$2.31 billion, and their overseas banking units (OBUs) reported a 8.2 percent rise in pre-tax profits to NT$7.07 billion, but their earnings contribution from domestic banking units (DBUs) fell 11.4 percent annually to NT$18.11 billion, data showed.
In the first half of the year, banks’ aggregate pre-tax earnings dipped 2.26 percent to NT$165.3 billion from NT$169.13 billion in the same period last year, the data showed.
In the first half, Taiwanese banks’ Chinese branches reported a pre-tax loss of NT$50 million, compared with pre-tax profits of NT$2.14 billion a year ago, data showed.
During the same period, banks’ pre-tax earnings from overseas branches excluding China rose 2.4 percent to NT$16.35 billion. Pre-tax earnings by their OBUs dropped 9.8 percent annually to NT$38.19 billion, while their DBUs’ pre-tax earnings rose 2 percent annually to NT$110.82 billion, data showed.
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