The consumer banking sector may not be able to emerge from the shadow of the credit and cash-card abuse saga until the end of next year, Fitch Ratings said yesterday.
"Credit card spending remains resilient," Jonathan Lee (
He added that credit card spending in July had declined by only 1 percent compared with a year ago.
But the overall credit and cash card lending business contraction may linger until the end of next year or the first half of 2008, Lee said.
Repayments by indebted cardholders under the debt restructuring scheme -- ?totaling some NT$278 billion (US$8.43 billion) -- remain risky, he added.
Debtors' burdens under the program are high, with an average indebtedness of 42 times monthly income, which could eventually lead to a default ratio of 50 percent, the analyst estimated.
Fitch expected the loss to be felt particularly over the next two years, dampening banks' already weak profitability.
For the first eight months of this year, aggregate pre-tax income of local lenders amounted to NT$36.12 billion, down 68 percent from NT$111.84 billion a year ago, according to government data.
Taiwan's unsecured consumer lending bubble burst in the second half of last year after excessive growth in the previous two years, boosted by careless pricing and customer quality control amid cut-throat competition.
To strengthen lenders' sense of risk management, the Financial Supervisory Commission last month asked local banks to discuss a slew of tightening measures, like scrapping bonus rewards given to credit cardholders and capping the combined lending balance of credit and cash cards at no higher than 10 times the amount of each cardholder's monthly income.
The Bankers Association (
The association also suggested not imposing a cap on credit and cash card lending.
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