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Fitch Ratings-Taipei/Singapore-25 August 2009: Fitch Ratings has today said, in a just published commentary, that Taiwanese banks maintained their asset quality and performed better than expected through the stormy global credit crisis. The performance led Fitch to revise upward its earlier, more pessimistic forecast for Taiwanese banks' profitability in 2009, driven mainly by a forecast reduction of nearly 50% in credit costs to 50bp (of total assets). The banking sector is now forecast to make a smaller loss of -0.14% (of total assets) in 2009, compared with an earlier forecast loss of -0.53%.
Fitch credits the multi-year deleveraging process before the crisis hit in 2008 by both Taiwanese households and corporates in general to the banks' good asset quality performance. Nevertheless, the agency believes the banking industry's large credit exposure to the troubled dynamic random access memory (DRAM) makers remains a significant threat to their asset quality over the short and medium term. Despite the good asset quality performance in H109, Jonathan Lee, Senior Director of the Financial Institutions team in Taiwan, warned that the likelihood of a prolonged weakness in economic growth will continue to depress banks' profitability through weak margins and high credit costs. The sharp economic recession starting from Q408 and the recent catastrophic damages in Southern Taiwan by Typhoon Morakot have caused more pressing issues in the short-term, and might put off any likely unpopular reforms by the government to resolve the chronic structural competitive issues (including dominance of large policy-dictated banks) in the Taiwanese banking industry.
The commentary, "Taiwan Banks: 2009 Half-Year Review and Outlook", is available at www.fitchresearch.com.
Contacts: Jonathan Lee, Sophia Chen, Joyce Huang, Taipei, +886 2 8175 7600.
Media Relations: Lisa Lim, Singapore, Tel: +65 6796 7214,
Email:
lisa.lim@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
