Robust employment, stable housing market anchors CUB’s profits

But net interest margin will likely stay flat or contract mildly.

A stable housing market, robust employment landscape, and strong wealth management income help buoy Taiwan’s Cathay United Bank (CUB) to a sound profitability and strong capitalisation.

The robust employment landscape will support CUB’s personal loan portfolio, which constitutes 15% of the bank’s total loans as of end-2023, said Moody’s Ratings, who reaffirmed its A1/P-1 foreign currency and local currency long-term and short-term bank deposit ratings for CUB.

The bank’s conservative loan-to-value ratios and the broadly stable housing market temper risks associated with the local property sector.

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“CUB has built up a good loan loss reserve buffer, with its loan loss reserve-to-impaired loans ratio rising to around 200% as of the end of 2023,” Moody’s Ratings said.

Profitability will remain stable, although net interest margin will likely stay flat or contract mildly.

“The bank will likely maintain strong non-interest income, driven by its continued strong wealth management income and income related to its cross-currency swap business in 2024. Given its expected sound asset quality, the rating agency predicts the bank's credit costs will remain low over the next 12-18 months,” Moody’s wrote in its report.