In the face of raising interest rates and recession, conservative lenders widen corporate loan margins in Taiwan. Recently, many Taiwanese borrowers have enjoyed loan pricing in a bid to cross the finish line. Queen Tak Development for instance has increased the after-tax interest rate floors on its 399m. This was a seven-year debut loan to 2.5% and 2.7%. The original covered 2.1% and 2.2% during the August launch. Then, Yeong Guan Energy Technology Group also increased its interest margins. The company raised NT$4.5bn dual-tranche loan by 60bp. This covers the two-year tranche now paying 120bp over Taibor. Plus, they offered 110bp of five-year tranche.
Moreover, Apex International, a printed circuit board manufacturer, also increased their margin loans. They raised a 100m five-year loan by 7bp to a 60bp-77bp range over Taifx. A Taipei-based senior loan banker at Taiwanese bank argued that the lenders are becoming conservative. They especially become more conservative towards deals in the market. He continued that funding costs for banks have risen following the raise of interest rates. It comes to a conclusion that they see only a few US dollar loans. Meanwhile, the thin margins do not reflect the cost in NT dollar loans.
The key interest rate has increased by 75bp for three times now. But, Taiwan’s central bank raised its by 12.5bp to 1.625%. This mirrors Taiwan’s recent rate rise following the previous increments of 25bp as well as 12.5bp. So, the total combination of the increase is 50bp this year. Then, the annual consumer inflation in Taiwan has touched near 14-year-high of 3.59%. Although, there is also a decrease to 2.75%.
