06.08.2001
Taishin, Bank SinoPac overdue loans still increasing

• Taishin International (2844 ‘Tai Xin’) and Bank SinoPac (2839 ‘Hua Xin’) have disclosed non-performing loans (NPL) figures for May. Taishin recorded a slight increase of 7bps to 2.81% MoM, and SinoPac a much larger MoM increase of 30bps to 1.53%.

• These figures show marked increases but are still well below the general consensus of more than 6% on the averages. SinoPac's high NPL ratio was likely caused by the inability of Tuntex Group’s related companies to repay loan interest on time. We expect the bank to have large exposure to the group, possibly more than NT$1.5b. The amount of new overdue loans for the bank in May equaled NT$500m. Taishin Bank on the other hand, has only NT$150m in overdue loans outstanding to the Tuntex Group, allowing the bank to post a smaller increase in NPL.

• VB Primasia Investment Opinion: Taishin’s and SinoPac’s willingness to disclose NPL figures suggests good corporate governance and transparency. We remain cautious on the increasing overdue loan figures among Taiwan Banks. Earnings may be brought to a lower level compared to last year with banks having to make provisions for bad debts. Earnings for Taishin may be less affected, as its higher interest spread will act as a buffer. We maintain ACCUMULATE on Taishin and REDUCE on Bank Sinopac.

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