Domestic Banks to Enjoy Larger Interest Spread in Q4 after Raising Lending Rate

Taipei, Oct. 8, 2012 (CENS)--To comply with the government's policy, some domestic banks in Taiwan have decided to raise lending rate to above 2% per annum, which is expected to widen the deposit-to-lending interest gap in the fourth quarter.

F.Y. Yang, president of Hua Nan Bank, indicated that currently the lending rate for most syndicated loans offered to enterprises by domestic banks in Taiwan is averaged at above 2% and in the first eight months of this year Hua Nan witnessed its net interest margin expand to 1.37 percentage points from 1.34 percentage points recorded in the first half of the year.

Yang predicted that the interest gap might keep widening to 1.4 percentage points for the full year, adding that his bank would continue to broaden the gap through offering new housing loans to individuals and corporate loans to small- and medium-sized enterprises.

The Cabinet-level Financial Supervisory Commission (FSC) has recently regulated that banks have to appropriate 1% of normal outstanding loans in the first category as reserves against bad loans. Hua Nan has to set aside NT$2.5 billion (US$83.33 million) as provision for such loans and the provision will be appropriated within three years.

H. C. Lin, spokesman and vice president of First Commercial Bank, said that First Bank has in recent year actively adjusted the structure of its lending, hoping to augment the lending-and-deposit interest gap.

In the Jan.-Aug. period, First Bank's lending-deposit interest gap posted at 1.48 percentage point, which is likely to expand to 1.5 percentage points for the full year; and in the same period, Chang Hua Bank saw the corresponding figure stand at 1.27 percentage points.