In addition to pursuing sustained sales growth, Taipei Fubon Bank remains committed to prudently implementing risk management measures in order to maintain favorable asset quality.
Credit Business Performance
1. Lending Interest Rate and Return on Investment
In 2017, due to the increase in the percentage of foreign currency deposit, the interest spread decreased from 1.34% in Q4 of 2016 to 1.27% in Q4 of 2017. However, with the revenue from bond investment, the net interest margin in Q4 of 2017 was 1.00%, representing a slight increase from 0.97% in Q4 of 2016.
2. Loan-to-Deposit Ratio (LDR)
As of the end of 2017, Fubon maintained an LDR of approximately 82.5% for accounts denominated in TWD and an LDR of approximately 35.0% for accounts denominated in foreign currencies.
3. Loans to Small and Medium Enterprises
As a sign of our continued support for SME development, loans to small and medium-sized enterprises (SME) grew to approximately NT$131.3 billion as of year-end 2017, an increase of approximately NT$8.2 billion (YoY+7%) compared to year-end 2016; SME loans rose to 24.77% of outstanding loans to enterprises as of the end of 2017.
Managing Risk Concentrations
The Bank has formulated lending restrictions based on the type of borrower, industry, country, and other factors in order to reduce concentration risk for loans.
1. Risk concentration conditions (as of December 31, 2017):
A summary of total outstanding credit to the Bank's top ten borrowers (group enterprises) as of year-end 2017 is provided below; borrower loan ratios for the current period ranged from 3.00% to 6.43% (all >10%), indicating an acceptable level of concentration.
2. Information concerning risk concentration according to industry type, region, and type of collateral: (as of December 31, 2017)
(1) Industry type
- Total outstanding loans increased by 7% as of year-end 2017 when compared to 2016, mainly due to the increase in private individual lending, private enterprise lending and financial institution lending.
- The main bulk of borrowers consisted of private individuals and private enterprises, which accounted for 51.25% and 35.20% of total outstanding loans, respectively, as of year-end 2017. As regards private individuals, the main types of loans were home mortgages and secured loans, accounting for approximately 91% of all loans issued to private individuals as of year-end 2017, indicating a reasonable level of credit risk concentration.
(2) Region type
The Bank's lending area primarily consists of the domestic (Taiwan) region, accounting for nearly 90%; overseas areas account for approximately 10% of outstanding loans.
(3) Collateral type
Total outstanding loans increased by 7% as of year-end of 2017 as compared to 2016. However, total outstanding credit for loan application collateral grew by 9% YoY which increased the proportion to 64.36% and boosted the overall collateralization ratio.
Quality of Credit Assets
Aside from continuing to boost sales growth, Taipei Fubon Bank also remains committed to prudently implementing risk management practices. As of year-end 2017, the Bank's NPL ratio and NPL coverage ratio reached highly desirable levels—0.17% and 764.46%, respectively—while favorable asset quality laid a strong foundation for the Bank to continue maintaining superior operations, a sound financial structure, and attractive prospects for future development.