05.16.2001
Overdue loans rise again in April, show no sign of letting up

• The seven large banks have announced their overdue loan (ODL) ratios for April. Total ODLs were up NT$14.2b to NT$430b, breaking last month's record to establish a new high historical high.

• The ODL ratios for Chang Hwa Commercial Bank (2801 'Zhang Yin'), First Commercial Bank (2802 'Yi Yin') and Hua Nan Commercial Bank (2803 'Hua Yin') are 7.35%, 7.15% and 6.91%, respectively. Chang Hwa and First Commerical both posted an increase of around 0.3%, while Hua Nan showed only a very slim increase. There is no change in the banks' rankings in terms of asset quality.

• Poor loan growth results in April is one of the main reasons for the ODL ratio increase. Domestic banks, particularly the big three commercial banks, are concerned about the probable insolvency of Tuntex Group which is carrying total bank debts of NT$58.1b. The fire at Eastern Science Park may further deteriorate the situation.

• VB Primasia Investment Opinion: We maintain our view that the big three commercial banks' ODLs will not improve much in 2Q01 and that Hua Nan possesses the best asset quality among the three. Also, given First Commercial's relatively high exposure to Tuntex Group loans, we maintain our HOLD recommendation on this bank.

WilliamFong@Primasia.com +886-[0]2-2547-8864