Taiwan's Syndicated-loan Rates Dip to Paper-Thin Levels

Taipei, March 23, 2010 (CENS)-Due to credit glut and acute inter-bank competition, Taiwan banks' syndicated loan rates dropped further, to merely 1-1.3% and breaking the previous low of 1.6%.

A bank manager pointed to a recent case involving NT$5-6 billion syndicated loan for the subsidiary of a listed steel firm, for which a local bank offered the stunning interest rate of 1.3% per annum. The syndicated-loan business has become a buyer's market, according to the manager. Some domestic banks have initiated the price war, such as Mega Bank and Taipei Fubon Bank, according to another banking manager.

One major reason behind the interest-rate war is the rapid growth in banking deposits, whose outstanding amount will soon top NT$3 trillion, prompting some domestic banks to seek outlets for their massive idle funds, at the expense of interest rates. The situation is especially true for non-government banks, whose boast lower fund costs.

The interest-rate war has been aggravated by the entry of NT$200 billion fund from Chung-Hwa Post Co., Ltd. into the market, made available by the repayment by Taiwan High-Speed Rail of NT$200 billion in advance.

Market players predicted that interest rates may hit new lows for a number of syndicated loans in talks now, including the US$500-600 million loan for Quanta Computer, NT$25 billion for HannStar Display, and NT$7-8 billion for Chunghwa Picture Tubes, which are to be approved in April.