Fubon Financial Holding Co (富邦金控) yesterday said that its banking unit is expected to post low-double-digit growth in corporate lending this year after reporting an annual 20.4 percent rise in corporate loans to NT$673.2 billion (US$22.48 billion) in the first quarter.
The increase reflected funding demand from returning Taiwanese companies, Taipei Fubon Commercial Bank (台北富邦銀行) general manager Roman Cheng (程耀輝) told an investors’ conference in Taipei.
Loans to small and medium-sized enterprises, which accounted for 41.5 percent of total lending, gained 12.9 percent to NT$279.1 billion in the first quarter, the bank said.
“Although some Taiwanese companies have turned conservative toward investment amid the COVID-19 pandemic, more companies have applied for loans to restructure their supply chains,” Cheng said.
The lender’s nonperforming loan ratio in the first quarter rose 5 basis points to 0.24 percent from 0.19 percent at the end of last year as it recognized soured loans to Singapore-based Agritrade International Pte Ltd, the parent company of Hong Kong-listed Agritrade Resources Ltd (鴻寶資源), he said.
Taipei Fubon Commercial has written off NT$610 million in bad loans, which accounted for 70 percent of its exposure of NT$880 million to the Singaporean commodity firm, Cheng said.
The bank expects to recover the remaining amount through negotiations with Agritrade International, he said.
The bank’s nonperforming loan ratio last month fell to 0.2 percent, but Fubon Financial president Jerry Harn (韓蔚廷) said it is difficult to predict the bad loan situation going forward.
“Many companies would likely postpone debt repayments to increase cash holdings to weather the effects of COVID-19, although the outbreak seems to have stabilized domestically,” Harn said.
Net interest margin, a gauge of banks’ profitability, edged up 4 basis points from the end of last year to 1.43 percent at the end of March, but rate cuts by the central bank and the US Federal Reserve would slash the gauge by 6 to 8 basis points by the end of this year, Taipei Fubon Commercial said.
Taiwan’s central bank might lower its benchmark rates for the second time this quarter by 12.5 basis points, with central bank Governor Yang Chin-long (楊金龍) saying that there was still room for cuts if necessary, Harn said.
Meanwhile, Fubon Life Insurance Co (富邦人壽) said that it expects an annual decline of 30 percent in first-year premiums this year after posting a fall of 42.6 percent to NT$37.1 billion in the first three months.
In light of new regulations that prevent life insurers from selling savings-type policies, it would concentrate on investment-linked policies and protection-type insurance products, Fubon Life said.
Its pre-hedging recurring yield was 3.06 percent, down from 3.12 percent a year earlier, and might hover between 3 percent and 3.5 percent this year, it said.
As the Fed’s cuts have narrowed the differential between interest rates in Taiwan and the US, which determines hedging costs for foreign currency exchanges, Fubon Life’s after-hedging recurring yield is likely to improve this year from last year, Harn said.
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