INTERVIEW/Bank of Taiwan's ratio of exposure to China over net worth falls sharply

Taipei, May 18 (CNA) The ratio of the Bank of Taiwan's exposure to China over its net worth has fallen sharply to the current 3.42 percent as the bank has been keen to reduce its reliance on the Chinese market, according to the bank.

In a recent interview with CNA, Lyu Jye-cherng (呂桔誠), who has served as the chairman of Taiwan's largest lender since 2016, said the ratio of the bank's exposure to China over its net worth plunged from a peak of about 45 percent eight years ago to the current 3.42 percent.

Lyu said the reduced ratio also came as many Taiwanese investors diversified their resources away from China to lower risks at a time of escalating trade tensions and tech competition between Washington and Beijing.

Bank of Taiwan's figure echoed data released by the Financial Supervisory Commission (FSC) earlier this month, which showed Taiwanese banks' exposure to China over their net worth as a whole for the first quarter of this year fell NT$8.14 billion (US$253 million) or 0.85 percent from a quarter earlier to NT$952.86 billion.

However, Taiwan's local banking sector as a whole still had a relatively high ratio of exposure to China, even though it fell 0.6 percentage points from a quarter earlier to 22.1 percent in the first quarter of this year, according to the FSC, the top financial regulator in Taiwan.

According to the FSC, the sector's total exposure to China and the ratio fell to a new low since the commission started the tallies in the third quarter of 2013. It cited concerns over China's economy and risks in the Chinese property market as a cause.

As for the fall in Bank of Taiwan's exposure to China, which has pushed down the bank's profits generated from China and Hong Kong, Lyu said in the interview that his bank has been keen to seek a balance in corporate banking, consumer banking and services to the public sector to make up for a possible fall in profit.

Lyu said once profits raked in from its corporate banking operations falls, the bank is able to turn more of its attention to consumer banking services.

For example, Lyu said the bank achieved a target of NT$200 billion in annual mortgage for five years in a row in 2023. In the first four months of this year, the bank extended NT$94 billion in mortgage, and the NT$200 billion goal can be also fulfilled this year, Lyu added.

Lyu said the mortgage business has become a stable income source for the Bank of Taiwan. He said the bank has watched closely the quality of its mortgages, more than 90 percent of which went to home buyers who took out loans to buy homes for themselves to live in, with the bad loan ratio accounting for only 0.09 percent of the total.

According to Lyu, Bank of Taiwan's outstanding mortgages has risen sharply to NT$1.1 trillion from the NT$600 billion seven years ago as the bank has successfully led ample liquidity in the market to the mortgage business by providing funds to those who bought homes for self-dwelling purposes.

In addition, Lyu said the bank has tried its best to maintain an interest spread at 75 basis points, which has helped the bank post NT$4.5 billion in profit each year.

Lyu said the bank saw its pre-tax profit hit the highest level of NT$11.8 billion for the first four months of this year.

The banker said he was upbeat about Taiwan's economic growth for this year, although uncertainty over when the U.S. Federal Reserve will cut interest rates, sticky inflation and geopolitical unease are expected to affect the pace of the recovery.

He said Taiwan will fare better economically this year for sure as artificial intelligence development has created tremendous business opportunities for the local sector, but he noted that old economy industries still faced challenges.

At the same time, Bank of Taiwan has been devoted to extending its reach globally by setting up outlets overseas, Lyu said, adding that his bank has opened a representative office in Arizona in 2022.

The Arizona office will serve contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), which is investing US$65 million to build advanced wafer fabs there, as well as the chipmaker's suppliers, Lyu said.

Lyu said Bank of Taiwan is the only Taiwanese bank which has set up footholds in five continents in the world to boost its global visibility.

Lyu added that the 125-year-old bank has also pursued digital transformation and in its workforce of 8,300 employees, about 1,120 specialize in digital technologies.

So far, Bank of Taiwan has secured 724 financial technology patents after it obtained the first one at the end of 2016, according to Lyu.