The nation’s three Web-only banks still have a long road to profitability as losses continued to pile up in the first half of this year, Financial Supervisory Commission (FSC) data released last week showed.
Line Bank Taiwan Ltd (連線商業銀行), Rakuten International Commercial Bank Co (樂天國際銀行) and Next Commercial Bank Co (將來商業銀行) reported combined losses of NT$6.58 billion (US$206.37 million) during the first six months of this year, greater than the losses of NT$3.58 billion registered in the same period last year, the commission said on Thursday.
Based on the experience of virtual banks abroad, banks need to invest heavily in information equipment in the initial stages, and it takes time to grow their customer base, so it is difficult to turn a profit in the short term, the commission said.
Photo courtesy of Next Commercial Bank Co
When the three companies applied for virtual banking licenses from the commission a few years ago, they had said they expected to break even in at least five years from their official launch, the regulator said.
The banks are only a few years old, with Rakuten International Commercial Bank launching at the end of 2020, followed by Line Bank in 2021 and Next Commercial Bank last year.
As of the end of June, Rakuten International Commercial Bank’s losses expanded 48 percent to NT$1.59 billion from NT$1.07 billion a year earlier, commission data showed.
Line Bank recorded a loss of NT$2.19 billion in the first half of this year, up 181 percent from NT$780 million in the previous year, while Next Commercial Bank lost NT$2.8 billion, up 62 percent from NT$1.73 billion a year earlier, the data showed.
If a bank’s losses exceed one-third of its paid-in capital, it is required to make up the deficit within three months.
If the bank fails to do so, the regulator would take it over or order it to suspend its business, the commission said, citing Article 64 of the Banking Act (銀行法).
Line Bank has completed a capital increase and Next Commercial Bank is about to proceed with its capital increase plan, it said, adding that Rakuten International Commercial Bank faces no such pressure for the time being.
In June last year, Line Bank reduced its capital by NT$2.5 billion to cut losses before increasing it by NT$7.5 billion, lifting its paid-in capital to NT$15 billion.
Next Commercial Bank’s shareholders on Wednesday last week approved the bank’s capital increase plan at an extraordinary meeting, allowing the bank to first cut capital by NT$2.64 billion to reduce losses and then raise fresh capital of NT$2.64 billion through a private placement.
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