SinoPac Financial Holdings Co (永豐金控) said that it expects the central bank to cut its benchmark interest rate again by 12.5 basis points next month to help the economy recover from the COVID-19 pandemic.
The central bank on March 19 cut its benchmark rate by 25 basis points.
“The [cut] is a market consensus, given that the US Federal Reserve slashed its benchmark rate to a range of zero to 0.25 percent; many foreign central banks have also reduced their rates,” SinoPac Financial president Stanley Chu (朱士廷) told a media briefing in Taipei on Tuesday.
Photo: Kelson Wang, Taipei Times
Rate cuts would weaken the firm’s profits, as deposit rates would be lower than lending rates, Chu said, adding that it would be a challenge for all financial firms.
Bank SinoPac (永豐銀行), the profit-making engine of SinoPac Financial, saw its net interest margin rise from 0.98 percent at the end of last year to 1 percent at the end of March, as the bank cut its deposit rates, Bank SinoPac president Eric Chuang (莊銘福) said.
The bank’s exposure to China grew 7 percent from a quarter earlier to NT$76.7 billion (US$2.55 billion), accounting for 63 percent of its net worth of NT$122 billion, Chuang said.
Its exposure ratio was relatively higher compared with other Taiwanese banks, which averaged 45 percent, and was only behind Taipei Fubon Commercial Bank’s (台北富邦銀行) 75 percent and CTBC Bank’s (中國信托銀行) 70 percent, Financial Supervisory Commission data showed.
“Our China exposure increased in the first quarter, as many corporate clients applied for more loans in January and February... They wanted to hold more cash to weather the impact of the pandemic,” Chuang said.
However, “it is our goal to reduce our exposure ratio gradually, as we are cautious about loan quality,” he said.
The bank expects Taiwan’s economy to bottom out this quarter with an annual growth of 0.83 percent, and rebound 1.43 percent in the third quarter and 1.69 percent in the fourth quarter, Chu said.
Full-year GDP is forecast to grow 1.38 percent this year, he said.
Bank SinoPac plans to recruit 1,500 employees this year to improve its momentum, Chu added.
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