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Taiwan's banking sector outlook stable: Moody's

Taiwan's banking sector outlook stable: Moody's

Taipei, Sept. 12 (CNA) Moody's Investors Service has rated the outlook for Taiwan's banking sector as "stable" despite signs of slowdowns in both the domestic and global economies. In a research report, Moody's said the stable outlook for Taiwan's banking system reflected expectations that the Taiwanese banks rated by the agency will maintain their steady credit profiles despite an economic slowdown. "We expect Taiwanese banks to report stable profitability over our outlook horizon, as higher margins from overseas lending will be partially offset by higher credit charges due to tightening regulatory provisioning requirements and slower economic growth," said Moody's vice president and senior analyst Sonny Hsu in a statement. The report titled "Banking System Outlook: Taiwan" provides an overview of credit trends affecting the country's banking sector over the next 12-18 months, and is based on the 10 Taiwanese banks rated by the agency, according to Moody's. Moody's said its baseline scenario was for Taiwan's real gross domestic product to grow 1.5 percent and 2.0 percent in 2015 and 2016, respectively, down from 3.4 percent in 2014, because of weaker than expected exports. "Although weak external conditions are leading to slower growth in industrial production and exports, the impact on Taiwanese banks' asset quality should be buffered by low interest rates and healthy corporate balance sheets," Hsu said. The credit ratings agency said the economic slowdown and lack of inflationary pressures meant that Taiwan's central bank will likely maintain an easy money policy for an extended period, even after the U.S. Federal Reserve begins raising interest rates. Taiwan's central bank is scheduled to hold a quarterly policymaking meeting on Sept. 24. The market has widely anticipated that the bank will leave its key interest rates unchanged. The government's willingness and capacity to provide support in a stress situation is also expected to remain strong, Moody's said. In terms of Taiwanese banks' exposure to China, the ratings agency said the rising lending to China could expose local banks to risks resulting from an economic slowdown in China, but the risks could be limited by regulatory caps on such lending. According to Moody's, Taiwanese banks' exposure to China rose to 62 percent of total shareholder equity as of the end of June 2015 from 50 percent as of the end of September 2013. The Moody's report was based on the 10 Taiwanese banks rated by the agency, including state-owned Bank of Taiwan (??), the largest lender in the country. Mega International Commercial Bank (???), CTBC Bank (???), Land Bank of Taiwan (??), First Commercial Bank (??) and Hua Nan Commercial Bank (??) are also among the banks rated by Moody's. (By Chiu Po-sheng and Frances Huang)


Updated : 2021-09-28 08:37 GMT+08:00