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.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary
RSS