The ratings impact of Taiwanese banks' continued expansion of offshore presence in Asia, particularly in higher-risk emerging markets, has been limited so far, but more aggressive risk-taking and acquisitions will put ratings under pressure, Fitch Ratings says. This is especially the case if additional risks are not adequately mitigated through higher risk buffers.
Strong growth in offshore lending, largely toward mainland China, is helping offset the slack in domestic lending resulting from weaker demand from the electronic technology sector and continued moderating growth in property-related lending. Regional expansion will enable faster growth, margin expansion and potential diversification benefits. But most Taiwanese banks have a limited record of successfully running offshore operations. Weaknesses in governance and transparency in many emerging Asian credit markets will also add to the challenges of developing a sustainable regional franchise.
Our full report, "Taiwanese Banks' Offshore Strategies Increase Risks", is available to subscribers at www.fitchratings.com
