Fed hike to boost interest income of Taiwanese banks

The country’s lenders own over $30b in US-denominated assets.

Tightening US monetary policy is expected to boost the profit prospects of the Taiwanese banking sector which holds over $33.3b (NT$1t) in US dollar denominated assets, according to the Financial Supervisory Commission (FSC) 

Also read: US tightening to buoy Hong Kong banks' profitability

Lenders are poised to rack in greater amounts of interest income on their USD assets following the hike, the country’s financial regulator said. As a number of lenders also participate in international syndicated loan initiatives, rising interest rates in the US are expected to boost income further.

This comes as a flurry of international banks are also cashing in on the country's competitive loan market with Japanese lender Mizuho leading the acquisition loan of world's biggest footwear maker Pou Chen Corp. 

“We are seeing more competition from our overseas counterparts in cross-border acquisition deals as they have branches in Taiwan and they are more experienced in this field, and sentiment is quite positive,” a senior loan manager at a top-tier Taiwanese state-owned bank told Reuters. 

The Fed raised the benchmark interest rate by a quarter point to a range between 1.75% and 2% in its latest policymaking meeting. It also hinted at two more hikes for the rest of the year as the world’s largest economy continues to surge.

The local securities sector is also expected to remain insulated from the hike as U.S. dollar-denominated bonds account for a measly 11.78% of the sector's total net worth, whilst greenback denominated futures products also make up less than 1% of the sector's total assets.