Banking sector’s bad loan ratio

The banking sector’s asset quality recovered slightly last month, with the bad loan ratio dropping marginally and the coverage ratio edging up, statistics released by the Financial Supervisory Commission showed yesterday.

The average non-performing loan (NPL) ratio of 41 local banks dropped by 0.02 percentage points sequentially to 2.33 percent last month, the data showed.

Meanwhile, the coverage ratio, an indicator used to gauge the sufficiency of reserves for loan defaults, rose 0.35 percentage points to 54.5 percent, the data showed.

Aggregate profits shrank by half from a year ago to NT$17.28 billion (US$526 million) last month amid the lingering shadow of the consumer credit abuse storm, the data showed.

The asset quality of troubled Bowa Bank one of three remaining blacklisted financial institutions, worsened further, with its net worth becoming minus NT$579 million from NT$41 million in April.

Negative net value is one of the conditions for government takeover of a debt-ridden lender. But the commission said it would have to wait for audited results of the bank’s first-half financial statement in August before it could take action.

Meanwhile, the bad loan ratio of credit card lending fell to 2.35 percent last month, down 0.02 percentage points from a month ago. The number of cards in circulation shrank nearly 37 million, and the outstanding amount of revolving credit fell 28 percent from a year ago to NT$309.6 billion last month.

The NPL ratio of cash card lending also slid 0.1 percentage points month-on-month to 6.84 percent. The number of cards in effect dropped 35 percent year-on-year to 1.85 million and outstanding lending plunged 40 percent from a year ago to NT$150 billion last month, the data showed.