Taiwan’s virtual banks tout corporate banking and FX to reach profitability

All 3 banks reported narrower losses in 2023.

Taiwan’s virtual banks (VBs) are expected to roll out corporate banking and other fee-generating businesses as they vie to achieve sustainable profitability, reports Fitch Ratings.  

All three VBs in Taiwan – Rakuten International Commercial Bank, LINE Bank Taiwan, and NEXT Commercial Bank– reported narrower losses in 2023 on the back of improving spread income from both lending and investment activities.

Fitch expects VBs based in Taiwan to evolve and diversify their business models. 

“Plans to add corporate lending, foreign exchange and mutual fund sales operations following recent regulatory relaxation should enhance their business profiles in the medium-to-long term,” the ratings agency said.

These plans will also increase their loan contribution to total assets (average 38% at end-2023) as well as non-interest income, broadening their profitability sources. As of end-2023, loan contribution to total assets averaged 38% across all three banks.

“At the same time, VBs may explore other avenues such as SME lending and weaker credit consumers for higher yields, although any rapid increase in their risk profiles could lead to potentially higher credit costs,” Fitch said.

The VBs are still expected to continue replying on their shareholders’ ordinary capital support before they can break even.