Local financial sector makes record profits last year


TAIPEI–An Dec. 30 statement by the Financial Supervisory Commission (FSC) said that Taiwan’s banking sector saw profits of NT$305 billion (US$9.629 billion) over the first eleven months of last year, marking a new high and indicating the industry is in good health.

For the month of November, total outstanding loans extended by Taiwanese banks grew NT$22.9 billion month-on-month to reach NT$2.479 trillion.

Non-performing loans (NPL) across the domestic banking sector totaled at NT$70.5 billion for the month, down NT$3.4 billion from the NT$73.9 billion recorded in October. Banks’ NPL ratio improved by 0.02 percent month-on-month at 0.28 percent.

As Taiwan’s 39 domestic banks operated with NPL ratios under 2 percent, the commission stated that Taiwan’s banking sector remains sound, backed by coverage ratios for allowances for NPLs of 442.07 percent, which improved from the 418.58 percent in October.

At the same time, the regulator said that a portion of profits reported by banks are classified as gain from bargain purchasing in mergers and acquisitions, meaning the windfalls may not be distributed among companies’ shareholders.

The acquisition of Japan’s Tokyo Star Bank by CTBC Bank in June last year netted the Taiwanese company bargain purchase gains of NT$14.81 billion, for example. The figure is derived by subtracting the purchase price paid by CTBC Bank from Tokyo Star’s net worth.

The FSC has therefore stipulated that gains derived from overseas acquisitions must be transferred to special reserves and may not be utilized over the following one-year period, after which the funds may only be used for compensating deficits or initiating capital increases by cash.

Since these gains are not actual cash gains, the limits imposed on fund distribution is designed to preserve the financial conditions of banks, the FSC explained.

Instances of overseas acquisitions are expected to rise as local banks expand overseas, leading the FSC to announce that the distribution limitation will be retroactively enforced for cases dating back to Jan. 1, 2014.