Taiwan Banks' Lending Rate Hits 17-Year High in Fourth Quarter of 2023

Taiwan's central bank tracks deposit and lending rates at domestic banks, offering a gauge of borrowing costs for businesses and consumers as well as banks' potential returns from lending deposited funds. The central bank maintained a tight monetary environment in 2023, pushing market rates higher and increasing banks' interest income. A wider spread between lending and deposit rates also became a key pillar of profit growth for domestic banks.

Central bank data showed that the weighted average rate on new loans by domestic banks rose to 2.52% in the fourth quarter of 2023, its highest level in 17 years. The weighted average deposit rate was 1.15%, while the lending-deposit spread widened from the previous quarter to 1.37 percentage points. The improved spread, coupled with a recovery in the domestic economy, provided a further boost to banks' net interest income and profit momentum.