Taipei Fubon Commercial Bank to achieve good profitability through 2025

Low credit costs and non-interest income will lift profitability.

Taipei Fubon Commercial Bank is expected to maintain a strong asset quality over the next 12-18 months, as well as achieve good profitability.

The Taiwanese bank’s non-performing loans (NPLs) are anticipated to hover at 0.6%-0.7% of its gross loans over the period, according to Moody’s Ratings.

Taipei Fubon Commercial Bank’s corporate loans are characterized by strong profitability and deleveraged balance sheets. 

Retail loans are bolstered by satisfactory employment conditions and adequate collateral for the bank's mortgage portfolio, the ratings agency said.

Taipei Fubon Commercial Bank is expected to maintain good profitability over the next 12-18 months, benefiting from low credit costs and non-interest income momentum.

In contrast, asset risks associated with its lending activities from its China-based bank subsidiary will likely increase if the mainland’s economic fundamentals continue to weaken, Moody’s said.

Loans held by its Chinese bank subsidiary constitute about 11% of the bank’s loan book at the end of 2023.

“Additionally, unexpected risks associated with mortgages and credit card receivables acquired from the retail banking operations of Citigroup in China could also impact the bank,” Moody’s said.

Net interest margin is expected to decline marginally with the Central Bank of Republic of China (Taiwan)'s stance favoring tight monetary policy over the next few quarters. 

Non-interest income is likely to remain strong, T driven by its continued strong performance in its retail and wealth management business and credit cards as well as gains from its investment portfolio over the next 12-18 months, Moody’s said.

Capitalization is expected to remain stable through end-2025, driven by its loan growth,

Basel III implementation on 1 January 2025 will have marginal impact on Taipei Fubon Commercial Bank’s Common Equity Tier 1 (CET1) capital ratio, whilst upstream dividend ratio will normalize to the pre-pandemic average.