Taiwanese banks would maintain stable earnings ability next year, as healthy exports and private investment would continue to drive the economy and support the banking sector amid expected rate cuts at home and in the US, Fitch Ratings said on Monday.
“We expect profitability [for the banking sector] to moderate slightly, as interest rate cuts in the US and Taiwan are to slow gains from foreign-exchange swaps and asset yields,” Fitch said in a report.
However, the rate cuts would ease borrowing costs, stimulate offshore lending momentum and reduce overall funding costs, which should alleviate pressure on net interest margins, it said.
Photo: Reuters
The key performance metrics would take place alongside Taiwan’s economic growth, which would mitigate to 2.7 percent next year, from an expected 4 percent pickup this year mainly due to the high base effect, Fitch said.
Strong exports of artificial intelligence-related products and investment activities would continue to be main growth drivers, it said.
Loan growth, which is 7.7 percent this year, is likely to stand at 5.6 percent next year, in line with GDP growth moderation, it said.
The scenario, along with rising fee income, should uphold core profitability and put banks in a good position for the international accounting rule changes, although the impact on capital should be limited, it said.
The ratings agency is looking at a modest rise in credit costs and impaired-loan ratios linked primarily to the unwinding of domestic relief loans from next year to 2026 and offshore lending.
A consistently low unemployment rate — projected at 3.3 percent for next year — and improving GDP per capita should offset potential asset-quality pressure and lend support to borrowers’ debt-servicing ability, it said.
A housing price correction could weigh on the banking sector’s profit outlook, as property loans including mortgage and construction loans constituted 37.5 percent of total domestic loans as of August, Fitch said, adding that a significant portion of loan collateral is also in real-estate properties.
House price correction is not Fitch’s base case scenario, it said.
The central bank’s tightening measures in June and September highlight the growing risks in banks’ exposure to the property market, it said.
Downward pressure on interest margins from rate cuts could strengthen banks’ risk appetite and prompt them to expand offshore lending in pursuit of higher yields, it said.
Aggressive growth in foreign borrowers across emerging markets could weaken the sector’s asset quality and core capitalization, Fitch said.
Softer economic growth among Taiwan’s major trading partners could also drag banks’ business generation prospects and deteriorate the sector given the nation’s open economy and high reliance on exports, it said.
Industry consolidation should have a positive effect on the sector, particularly in terms of earnings, profitability and capital accumulation, it said.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Chizuko Kimura has become the first female sushi chef in the world to win a Michelin star, fulfilling a promise she made to her dying husband to continue his legacy. The 54-year-old Japanese chef regained the Michelin star her late husband, Shunei Kimura, won three years ago for their Sushi Shunei restaurant in Paris. For Shunei Kimura, the star was a dream come true. However, the joy was short-lived. He died from cancer just three months later in June 2022. He was 65. The following year, the restaurant in the heart of Montmartre lost its star rating. Chizuko Kimura insisted that the new star is still down
While China’s leaders use their economic and political might to fight US President Donald Trump’s trade war “to the end,” its army of social media soldiers are embarking on a more humorous campaign online. Trump’s tariff blitz has seen Washington and Beijing impose eye-watering duties on imports from the other, fanning a standoff between the economic superpowers that has sparked global recession fears and sent markets into a tailspin. Trump says his policy is a response to years of being “ripped off” by other countries and aims to bring manufacturing to the US, forcing companies to employ US workers. However, China’s online warriors
RSS