Taipei-Moody's Investors Service has revised the outlook for Taiwan's banking sector to stable from negative, citing strong economic growth that has supported banks' asset quality, the ratings agency said in a research report published Monday.
"Taiwan's economy has emerged from the coronavirus pandemic in relatively good shape. As the global economy recovers in 2021, it will likely remain strong, supporting banks' operating environment, asset quality and liquidity," according to Sonny Hsu (???), a senior credit officer at Moody's.
Moody's forecast Taiwan's real gross domestic product (GDP) growth at 3.7 percent in 2021 and 3.5 percent in 2022, and said the central bank's monetary policy will support funding and liquidity, keeping the banking system's loan to deposit ratio at around 70 percent.
In addition, government support for banks will remain strong, given that the government has ample fiscal capacity to support banks, Moody's said.
Taiwanese banks' profitability will remain moderate, however, because of fierce competition in an overcrowded market and low interest rates, with net interest margins at just below 1 percent and return on average assets at around 0.5 percent, the report said.
The stable outlook for Taiwan's banking system is driven by what should be a stable operating environment for its banks and a positive outlook for Taiwan's sovereign rating, according to the ratings agency.
In February, Moody's upgraded Taiwan's sovereign credit outlook to positive from stable.
It said in a report at that time that the change reflected Taiwan's strong economic resilience and governance strength.
Source: Focus Taiwan News Channel