Mega ICBC's problem loans may rise on SME and tariff risks: Moody’s

The bank’s foreign currency loan portfolio may benefit from higher USD lending margins, however.

Mega International Commercial Bank (Mega ICBC) is expected to maintain a robust financial profile in the next 12-18 months, but problem loans may rise in the next two years due to its SME lending and tariff impact.

The Taiwanese bank’s problem loans ratio is low at 0.6% as of 30 September 2025. It is expected to see a mild increase in 2026-2027 due to the bank’s loans to small and medium enterprises (SMEs), and lending to clients in more tariff impacted countries in South and Southeast Asia.

“Nevertheless, the bank has substantial credit reserves to cover these potential risks,” Moody’s Ratings said in a ratings commentary published on 20 January 2026.

The bank’s asset quality will be supported by stable conditions of its home market and its own conservative underwriting standards, it added.

Mega ICBC’s capitalisation is “stronger than that of most domestic peers” with tangible common equity to risk weighted assets (TCE/RWA) at 14.8% in end-June 2025, versus 13% at year-end 2024. This reflects a TWD14.3b capital injection and lower risk weights from its adoption of Basel III reforms, Moody’s said.

Profitability is expected to remain sound with return on tangible assets at 0.7% to 0.75%.

Mega ICBC’s international footprint and large foreign currency loan portfolio is in a position to benefit from higher USD lending margins and valuation gains on USD bonds, Moody’s said.

“However, weaker demand for foreign currency loans reduced the NIM to 0.93% in the first nine months of 2025, from 0.95% a year earlier,” the ratings agency said.