Union Bank staying cautious on local housing market

• By Crystal Hsu /
  Staff reporter

Union Bank of Taiwan (聯邦銀行) has a cautious view about the housing market for the rest of this year, as prices increase and developers release new projects.

The Taipei-based lender on Tuesday said it would prefer to wait and see in dealing with mortgages, regardless of the ongoing property boom.

Housing transactions in the six special municipalities in the first seven months spiked 28.5 percent from the same period last year, helped by a robust economic recovery, a stable job market and wealth inflation linked to the local bourse.

Photo: Lee Chin-hui, Taipei Times

The conservative approach has much to do with its longstanding mortgage policy and concern over its risk-based capital, the bank told an online investors’ conference.

The housing market has been booming for a year since the government in August last year introduced favorable lending terms for first-home purchases, including interest subsidies, a five-year grace period and mortgages of up to 40 years, the bank said.

The central bank in June announced measures to tighten lenders’ reserve requirement ratio by 25 basis points to prevent too much money flowing to the real-estate market. In addition, it lowered the loan-to-value cap from 70 percent to 60 percent for second-home mortgages in the six special municipalities, as well as in Hsinchu city and county.

At the same time, the Ministry of Finance asked state-run banks to implement more thorough reviews for first-home mortgage applications to root out dummy buyers and investors.

That backdrop is driving up the risks of house loans and Union Bank has to respond, it said.

The bank also called attention to developers offloading unsold houses in batches, which would considerably increase the supply of houses.

The bank said it emerged unharmed from the stock market rout on Monday, even though local shares constitute the bulk of its investments in equities, thanks to its investments in US bonds.

Those investments would reap further rewards should the US Federal Reserve cut interest rates later this year, it said.

Union Bank’s net profit grew 9.28 percent to NT$2.73 billion (US$83.53 million) in the first half of the year, as fee income rose 6.38 percent while net interest income declined 6.93 percent, the bank said.

The results translated into earnings per share of NT$0.55, a 3.77 percent uptick from a year earlier.

The bank said it aims to strengthen its credit card business, and its has lowered hurdles for cardholders to win bonuses and benefits.

Card spending in the first half was up 30 percent from a year earlier and the card activation rate climbed to 65 percent, making the bank the fifth-best performer in the nation, it said.