State-run Chang Hwa Commercial Bank (CHB, 彰化銀行) yesterday said it remains positive about profitability enhancements this year due to interest rate hikes, even though economic uncertainty is building.
The bank’s interest spread increased 4 basis points in the first quarter, while its net interest margin added 5 basis points, enabling its net income to grow 22.16 percent year-on-year to NT$2.38 billion, CHB said.
The benefits of interest rate hikes would become more evident this quarter after the US Federal Reserve increased interest rates for a second time by 0.75 percentage points earlier this month and Taiwan’s central bank raised it rates by 0.125 percentage points, CHB said.
Photo: CNA
CHB’s upbeat outlook came even though it agreed that downside risks are worsening, and corporate and retail customers could become conservative about loan demand.
“We will closely monitor global market changes and adjust our portfolio to make better use of investment funds,” CHB officials said.
CHB intends to raise its stake in blue-chip companies whose share prices are taking a hard hit from global monetary tightening, as well as increase bond holdings to take advantage of interest rate hikes.
CHB said that the central bank’s 0.25 percentage-point increase of the required reserve ratio meant it would have less money for lending, but the impact should be very limited.
It said it is expecting decreased demand for land financing and mortgage operations, as developers would refrain from using an active sales strategy following four waves of selective credit controls and two interest rate hikes.
Soaring building material prices and labor shortages also warrant caution, it added.
GDP growth at home and abroad might lose some momentum to inflation and the war in Ukraine, but Taiwanese tech firms have pressed ahead with capacity expansions, which is favorable for commercial banking, CHB said.
At the same time, it would reach out to urban renewal projects, as they are not affected by credit controls, the bank added.
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