Taiwan's banks, securities firms record mediocre first-half results.

Taipei, Sept. 25, 2009 (CENS) -- Taiwan's financial institutions continued to report mediocre operating results for the first half of this year with only marginal improvement from 2008. Nonetheless, the island's capital markets are showing early signs of recovery, but most financial institutions are unlikely to enhance their operating results in the near term due to the sluggish economy, according to a report conducted by the Taiwan Ratings Corporation (TRC).

"Competitive market conditions and low interest rates continue to prevent significant improvement in bank's consistently thin net interest margins," said TRC's credit analyst Eva Chou. "The banking sector reported only slight growth in performance in the first half of 2009 and faces the potential for rising credit costs under a recession."

Taiwan's securities sector experienced a far stronger rebound in profitability in 2009 amid volatile activity in the local stock market. "The sector registered an annualized return on average assets of 3.9% in the first half of 2009, up from negative 4.1% in the second half of 2008," said TRC credit analyst Chris Lee.

TRC noted structural weaknesses and a difficult macroeconomic environment disrupted the efforts of Taiwan's financial institutions to restore their credit metrics in the first half of 2009. The next few quarters are unlikely to bring significant change to institutions' mediocre operating results amid a sluggish economy. But some banks and securities houses have made a modest turnaround from the lows seen earlier in the current recession. Although Taiwan has experienced four consecutive quarters of negative GDP growth in 2008-2009, the island's capital markets are showing early sings of recovery with several financial institutions recording improved valuation in their marketable securities.

TRC believed that potential rising credit costs and the continuing high volatility in the domestic capital market will constrain operating results for banks and securities houses throughout 2009.

((BS)) (GE)