Tuesday, 21 September 2021

Cathay United Bank’s sufficient capital buffers and strong risk management weather COVID-19 impact

26 February 2021, Singapore Cathay United Bank (CUB) was recognised as the Strongest Bank by Balance Sheet in Taiwan in 2020. CUB and other banks were recognised at the Strongest Banks by Balance Sheet Briefing and Recognition Virtual Ceremony 2020 presented by The Asian Banker.

This is the most comprehensive annual evaluation that captures the quality and sustainability of the balance sheets of banks in the Asia Pacific (APAC), Middle East, and Africa regions.

The ranking is based on a detailed and transparent scorecard that evaluates commercial banks and financial holding companies (banks) in six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity. For Strongest Banks by Balance Sheet 2020, the financial information in the first half of 2020 (1H 2020) was collated and incorporated into the assessment of how banks performed during the COVID-19 pandemic.

CUB tops ranking of strongest banks by balance sheet in Taiwan

The bank demonstrated better performance in most areas such as profitability, risk profile, asset quality and liquidity which resulted in improved overall balance sheet strength. Its capital adequacy ratio (CAR) went up from 15.1% in the previous year to 15.8%, the highest among its peers in Taiwan. Meanwhile, it exhibited strong risk management and its liquidity was sufficiently maintained.

The following were especially considered in the evaluation of the banks’ balance sheet strength and resilience: how accelerated digitalisation are enhancing bank balance sheet strength, the impact of debt moratoria, rescheduling and financial aid measures introduced by regulators on bank asset quality, how banks are growing alternative sources of income amid the record low interest rate, and the strategic economic relief and regulatory support in response to the crisis and effect on the pace and scale of recovery.

The bank achieved stable profitability despite the pandemic

With the strength score of 3.6 out of 5, CUB emerged as the strongest bank by balance sheet in Taiwan. It took the 25th spot out of 500 in the Strongest Bank by Balance Sheet ranking in APAC while First Commercial Bank and Taipei Fubon Commercial Bank, the second and the third strongest banks in Taiwan, are in the 40th and 43rd places in the region. Bank of Taiwan, the largest bank by total assets in Taiwan, placed 54th.

CUB showed better performance in the areas of profitability, risk profile and liquidity relative to First Commercial Bank and Taipei Fubon Commercial Bank. The return on assets (ROA) of CUB edged up from 0.89% in 1H 2019 to 0.91% in 1H 2020 which was better than 0.54% for First Commercial Bank and 0.66% for Taipei Fubon Commercial Bank. Its cost to income ratio improved from 51.3% to 47.5%. Meanwhile, it also recorded a non-interest income to total operating income ratio of 46%, higher than First Commercial Bank (37.1%) and Taipei Fubon Commercial Bank (39%). Bank of Taiwan maintained stronger liquidity buffers than CUB but its profitability was much weaker. In 1H 2020, Bank of Taiwan registered a low ROA of 0.2% and a high cost to income ratio of 76%.

The bank maintained stronger capital and liquidity positions

The CAR of CUB was the highest among its peers in Taiwan. Its CAR went up from 15.1% in 1H 2019 to 15.8% in 1H 2020 mainly due to the capital injection from its parent Cathay Financial Holding. This helped the bank meet the higher capital standard set for domestic banks. The weighted average CAR of the 34 Taiwanese banks on the list was 14.1%. The CAR of First Commercial Bank, Taipei Fubon Commercial Bank, and Bank of Taiwan stood at 13.7%, 12.9% and 15.4%, respectively.

CUB recorded liquid assets to total deposits and borrowings ratio of 31.1% in 1H 2020, higher than 28.1% in 1H 2019. Meanwhile, its loan to deposit ratio fell from 73.4% in 1H 2019 to 69.6% in 1H 2020, lower than the industry average ratio of 75.3%.

For the evaluation criteria and full ranking list of Strongest Banks click here

About the programme

The Asian Banker Strongest Banks by Balance Sheet is an annual assessment of the financial and business performance of the banking industry in the Asia Pacific, Middle East, and Africa regions. The assessment ranks the top performing banks in each country by strength, an evaluation that is based on a belief that a strong bank demonstrates long-term profitability from its core businesses.

The scope and coverage for The Asian Banker Strongest Banks by Balance Sheet come from both the mature markets and the most promising emerging markets in the regions. The focus of the assessment is on commercial banks and financial holding companies with a significant proportion of activity in commercial banking. The assessment does not include central banks, policy banks or finance companies.

The winners are determined using a scorecard approach based on six crucial performance indicators rated on a scale of 0-5: scale, balance sheet growth, risk profile, profitability, asset quality, and liquidity.

About The Asian Banker

The Asian Banker is the region’s most authoritative provider of strategic business intelligence to the financial services community. The Singapore-based company has offices in Singapore, Malaysia, Manila, Hong Kong, Beijing, and Dubai, as well as representatives in London, New York, and San Francisco. It has a business model that revolves around three core business lines: publications, research services and forums. The company’s website is www.theasianbanker.com 

For further information, please contact:

Ms. Sue Kim

Marketing Manager



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