King’s Town Bank (京城銀行) on Tuesday said it is conservative about its lending business this year, despite its loans last year increasing 6.49 percent year-on-year to NT$154.6 billion (US$5.02 billion), as the Taiwanese economy is expected slow.
The bank also had a bad experience with soured loans last year, so it has no intention of significantly expanding its lending this year, chairman Terence Tai (戴誠志) told an investors’ conference in Taipei.
“The amount of lending is to grow only slightly this year,” Tai said.
The bank reported that net profit fell 49 percent to NT$2.88 billion last year, from NT$5.61 billion in 2017, as it suffered losses from its loans to Chunghwa Picture Tubes Ltd (CPT, 中華映管) totaling NT$1.64 billion.
Fee income on lending jumped 12.2 percent to NT$1.43 billion, faster than the pace of lending growth, as some borrowers paid off their debts early, Tai said.
Total fee income expanded 4 percent from a year earlier to NT$1.84 billion, while interest income rose 4.5 percent to NT$5.01 billion, bank data showed.
Small and medium-sized enterprises were the bank’s main borrowers last year, accounting for 55.4 percent of its total lending, followed by big companies with 24.2 percent, construction businesses with 11.5 percent and individual borrowers making up the remainder, the data showed.
To maintain its profitability, the Tainan-based bank has refrained from cutting interest rates on loans to gain customers in a saturated market, Tai said.
The bank’s interest spread — the difference between the interest rate for loans and deposits — rose to 2.21 percent last year, up from 2.17 percent in 2017 and higher than the industry’s average of 1.34 percent.
“We are still trying to find the optimum rates at which we can have the biggest profit,” Tai said. “We have become less aggressive in terms of investment strategy due to CPT’s bad loans.”
King’s Town would continue to buy domestic bonds as they are less risky compared with local or foreign equities, he said.
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