Although challenged by adverse economic conditions and increasing competition in the market, on the whole Taiwan's banks managed to record modest profit growth during 2008. Writer Charles Piggott

The Banker's Taiwanese bank ranking shows that despite a sluggish economy, low interest rates and a fiercely competitive market, the average Top 25 bank increased its Tier 1 capital by 22.4%.

Taiwan's two largest banks, Bank of Taiwan (ranked in first place) and Mega International Commercial Bank (second), saw little change in Tier 1 capital. Bank of Taiwan's Tier 1 capital dropped 2% in US dollar terms to $5.08bn and Mega International Commercial Bank increased its Tier 1 capital by 1.9% to $4.37bn.

The big mover in the ranking was Chinatrust Commercial Bank, Taiwan's biggest credit card issuer, which took third place after a 67.4% increase in Tier 1 capital to $3.54bn. Other rapid climbers in the ranking included Shanghai Commercial & Savings Bank (up five places to seventh) and Standard Chartered Bank (Taiwan) (up six places to 16th).

Standard Chartered Bank more than doubled the size of its Tier 1 capital with a 127.7% increase, the largest percentage capital increase of any bank in this year's ranking.

Citibank Taiwan* (24th) is one of the Top 25's two new entrants, alongside Taichung Commercial Bank, which entered at 25th position having increased its Tier 1 capital by 93.6% in 2008 to $490m.

However, 2008 was generally a disappointing year for the Taiwanese banking sector. The average bank in the Top 25 registered only a slight annual increase in pre-tax profits of 1.5%. Meanwhile, the average Top 25 return on capital (this year's pre-tax profits divided by the bank's average Tier 1 capital over the past two years) was just 3.96%.

Bright lights

In a year when profits were generally subdued, Chinatrust Commercial Bank stood out with pre-tax profits of $440m. The bank also registered the Top 25's highest annual return on assets at 0.9% and the highest return on average capital of 15.58%. In July 2009, Chinatrust Commercial Bank added to its 74 existing overseas offices, opening a new regional office in Singapore. However, in August the bank's parent company, Chinatrust Financial Holding, was forced to revise its profits for the first half of 2009 downwards by 93% after it placed $124m into a provision account to compensate investors that bought structured notes, including issues from the collapsed Lehman Brothers.

Shanghai Commercial & Savings Bank also stood out in 2008, increasing its total assets by 79% to $32.8bn and moving up the ranking from 12th to seventh place. Shanghai Commercial & Savings Bank had the largest increase in total assets of any bank in the ranking, followed by Standard Chartered Bank (Taiwan) and E Sun Bank with increases in total assets of 50.4% and 32.2%, respectively. The average Top 25 bank had an annual increase in total assets of 13.5%.

E Sun Bank had the largest percentage increase in pre-tax profits, which rose 189.9% to $35m in 2008, followed by Taipei Fubon Bank, which increased its pre-tax profits by 93.4% to $242m. Land Bank of Taiwan also had a good year, increasing its pre-tax profits by 47.2% to $233m.

Taiwan Business Bank was the most cost efficient in the ranking, with a cost-to-income ratio of just 35.14% - compared with the Top 25 average of 64.51% - followed by Citibank Taiwan (at 39.47%) and Shanghai Commercial & Savings Bank (at 41.37%).

Cosmos Bank Taiwan (in which financial groups SAC Private Capital and GE Money hold major stakes) also had a good year following its recapitalisation, increasing its Tier 1 capital by 71.1% to $603m. At the end of 2008, the bank had the strongest capital-to-assets ratio in the Top 25 at 12%, up significantly from 4.69% at the end of 2007. The average bank in the Top 25 had capital equal to 5.57% of its total assets at the end of last year, up from 5.1% at the end of 2007.

* Citibank Taiwan figures are based on year-end 2007, all other figures in the ranking are for year-end 2008.

Top five Taiwanese banks by assets ($m) 2008

Top five Taiwanese banks by assets ($m) 2008

Top five Taiwanese banks by pre-tax profits ($m) 2008

Top five Taiwanese banks by pre-tax profits ($m) 2008

Click here to see further details of the Top 25 Taiwanese Banks

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