Taiwan's 7 leading domestic banks saw average NPL ratio drop to 4.72% in Nov.

Dec 16, 2003 Ι Industry In-Focus Ι Furniture Ι By Judy, CENS
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Taipei, Dec. 16, 2003 (CENS)--Total outstanding non-performing loans (NPLs) recorded by seven leading domestic banks at the end of November declined to NT$298.7 billion (US$8.79 billion), and their average NPL ratio decreased to 4.72% from 5.18% a month earlier as a result.

The seven banks are Bank of Taiwan, Taiwan Cooperative Bank, Land Bank of Taiwan, Taiwan Business Bank, First Commercial Bank, Hua Nan Commercial Bank and Chang Hwa Commercial Bank.

To comply with the government's policy of lowering NPL ratio, the First Commercial Bank (FCB) last month wrote off near NT$30 billion (US$882.4 million) worth of NPLs and largely lowered its NPL ratio to 1.87% from October's 3.95%. As of the end of November, most of the seven banks registered a NPL ratio of under 5%, except Chang Hwa Bank and Taiwan Business Bank (TBB), whose NPL ratios stood 5.49% and 9.87%, respectively.

Although TBB's capital adequacy ratio posted at 10.23% in November, higher than the average of 8%, yet its retained earnings stayed at a relatively low level and could not be applied to cover its NPLs. The bank therefore erased its bad loans only with monthly profits and, as of the end of November, wrote off a total of NT$3.77 billion (US$110.74 million) in NPLs.

To improve the quality of its assets, TBB plans to enlarge its stock pool next year by 550 billion shares, which is expected to increase its capital by issuing NT$5.5 billion (US$161.77 million) worth of new shares. In addition, the bank has determined to issue NT$5.5 billion (US$161.77 million) in subordinated bonds also in 2004. But it has not decided yet to issue the bonds at home or abroad. If the issuance of new shares and subordinated bonds fares smoothly, the bank is expected to absorb additional capital of NT$11 billion (US$323.53 million) in the first half of 2004, which may be used to write off NPLs.

Since the beginning of November, TBB has contacted several foreign assets management companies (AMCs) to discuss the establishment of a joint-venture AMC to help the bank erase its NPLs. But no conclusions have been reached yet.

With NPL ratio down to 1.87% in November, FCB boasted the best asset quality among the seven banks. Bank of Taiwan came in second with a NPL ratio of 2.28%, followed by Hua Nan Commercial Bank with 3.75%, Taiwan Cooperative Bank, 4.89% and Lank Bank of Taiwan 4.9%. In the same month, FCB registered the lowest outstanding NPLs at NT$15.7 billion (US$461.77 million), and TBB recorded the highest NPLs of NT$68.3 billion (US$2.01 billion).

NPLs of Seven Leading Domestic Banks as of November 2003


NPL Ratio (%)

NPLs (Unit: NT$100M.)

First Commercial Bank

1.87 (-2.08)

157 (-187)

Bank of Taiwan

2.28 (-0.06)

252 (-11)

Hua Nan Commercial Bank

3.75 (-0.29)

312 (-13)

Taiwan Cooperative Bank

4.89 (-0.07)

573 (-5)

Land Bank of Taiwan

4.90 (-0.23)

570 (-8)

Chang Hwa Bank

5.49 (-0.49)

440 (-29)

Taiwan Business Bank

9.87 (-0.01)

683 (+3)


4.72 (-0.46)




2,987 (-247)

* The figures inside the parentheses are the changes seen in comparison with October levels.

Sources: The seven banks

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