Taiwanese banks are likely to face softer profits and declining asset quality as loan expansion slows and fee-based income comes under pressure due to ongoing market uncertainty.
“Net fee income is set to fall with weaker loan growth and a slowdown in wealth management activity amid uncertain market conditions,” Fitch Ratings said in its 2026 outlook.
Despite these challenges, banks should maintain strong capital buffers through 2027, according to midyear analysis from S&P Global Ratings, which noted the sector’s broad and stable retail deposit base.
However, uncertainty surrounding potential U.S. tariff moves continues to cloud Taiwan’s forecast. Fitch cautioned that any tariff hikes on high-tech goods — which make up more than 70% of Taiwan’s U.S. exports — could hurt corporate performance, with softer U.S. demand further dragging on exports.
Fitch expects loan growth to ease to about 5% in 2026, down from around 6%–7% in 2025, as corporate borrowing slows.
The real estate sector may pose additional risks. S&P Global Ratings previously warned that property-related lending could drive an increase in non-performing loans over the next couple of years.
Banks are also bracing for higher credit costs amid a potential rise in bad loans. Still, net interest margins are projected to stay steady, supported by reduced funding expenses.
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