The non-performing loan ratio of Taiwanese banks edged up in August, the first increase in two years, and last month’s figure may climb higher as the risk of a default by embattled memory chipmaker ProMOS Technologies Inc (茂德科技) looms larger, the Financial Supervisory Commission said yesterday.
The domestic banking sector’s bad loan ratio stood at 0.47 percent at the end of August, compared with 0.46 percent in July, the commission’s latest data showed.
The 0.01 percentage point increase in the bad loan ratio in August was attributable to Cosmos Bank (萬泰銀行) recognizing its loan loss caused by Prince Motors Group (太子汽車), the local sales agent of Japan’s Suzuki Motor Corp.
Prince Motors chairman Hsu Sheng-fa (許勝發) is also the founder and former chairman of Cosmos Bank, but relinquished control of the nation’s largest issuer of debit cards after selling a combined 80 percent stake in 2007.
Cosmos Bank has about NT$5.6 billion (US$182.53 million) in secured lending to the cash-strapped Prince Motors. The lender earlier said that it might recover losses later by auctioning the motor company’s real-estate collateral.
Still, the lender is the only bank among 37 domestic peers with a bad loan ratio above the 2 percent level with 6.66 percent, the commission said.
Overall, bad loans with domestic banks totaled NT$98.7 billion as of Aug. 31, up NT$1.8 billion from a month earlier, while outstanding loans increased by NT$247.7 billion to NT$21.12 trillion, the commission’s data showed.
Prince Motors’ default has had little negative impact on the banking sector, compared with that of ProMOS Technologies, which owes about NT$58 billion in a syndicated loan to scores of state-run and private lenders, Chang Kuo-ming (張國銘), deputy director-general of the commission’s Banking Bureau, said yesterday at a press conference.
A ProMOS default would lift the bad loan ratio by another 0.2 percentage points, Chang said, adding that the commission has urged creditor banks to increase provisions as a rescue package remains a pipe dream so far.
The regulator has also asked financial institutions to step up risk-hedging for overseas investments even though their exposure to Greece is modest at NT$1.8 billion, Chang said.
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