Taiwan banks’ profits flat in 2023

Bottom lines are expected to remain flat in the same year.

The credit costs of banks in Taiwan are expected to rise in 2022-2023 as loan moratoriums end, but asset quality should remain “satisfactory”, according to S&P Global Ratings’ latest Mid-Year Banking Outlook report.

Asset quality metrics are expected to slightly weaken by end-2023, whilst banks’ bottom lines will likely remain flat in the same year.

“We expect banks' non-performing assets (NPAs) ratio to continue to undergo under slight pressure in 2023. The government's loan moratorium program--which began in 2020 and rolled over to June 2022 for corporate loans and in June 2023 for retails loans--may push banks' NPA recognition into 2023,” said Yuhan Lan, primary credit analyst, S&P Global Ratings.

READ MORE: Taiwan banks’ NPL ratio at 0.16% in May

However, Lan said that the overall asset quality of Taiwan's banks will remain satisfactory given sufficient provision buffers. Steady global demand for semiconductors and rising consumer spending should support the economy, she added.

“Despite elevated COVID-19 local cases since mid-2022, Taiwan is likely to continue with re-opening policies, which should underpin business growth in 2023. The pandemic could somewhat weaken profitability in the banking sector because of increased credit costs but not cause capital shock,” Lan noted.