Due to their small scale, opaque information, and imperfect internal management, small and medium-sized enterprises(SME) in the early days mostly needed to provide collateral to obtain working capital when borrowing from banks.
With the advancement of bank risk management technology, companies can more accurately estimate their probability of default(PD) and the loss given default(LGD) are low. For small and medium-sized enterprise(SME) customers with low probability of default, they can also get pure credit loans (no collateral).
In addition, for small and medium-sized enterprises(SME) with a high probability of default, if banks can make good use of the mechanism of the SME Credit Guarantee Fund and exert the effect of the law of large numbers, they can make up for the problem of default losses.
Most banks prefer to take on large customers, whose business volume, asset scale, and profits can be accumulated quickly, but do not like to take on small customers. The banking industry in various countries has similar situations.
In view of this, governments in various countries will launch various measures to encourage banks to serve small and medium-sized enterprises.
Therefore, the author has a relatively good impression of banks that handle a large amount of business for small and medium-sized enterprises.
To find the best bank for lending to small and medium-sized enterprises, we must first define what is the best “the best bank for lending to small and medium-sized enterprises”. [Definition] is very important, because different definitions will lead to different results.
Here, we explore “What is the best small and medium-sized enterprise lending bank in Taiwan” from three dimensions: “small and medium-sized enterprise business volume scale”, “duration of top 1 in the rankings” and “small and medium-sized enterprise loan balance as a proportion of domestic loans”.
Table of Contents
Small and medium-sized enterprise (SME)business volume scale
1. Analysis of loan balance of small and medium-sized enterprises(SME)
First of all, we need to evaluate whether small and medium-sized enterprises have done a good job in lending. The absolute amount of the loan balance must be put “first”. Before the establishment of new banks in the early 1990s, Taiwan’s financial market was oligopolized by public banks for a long time, which created a problem for public banks. They are rich in wealth and have high asset value. They are far larger than private banks in terms of asset size, profit scale, number of branches at home and abroad, or number of employees.
The same is true for the performance of the business volume of small and medium-sized enterprise lending business. For many years, the banks that have ranked top in the lending balance of small and medium-sized enterprises are almost all of the eight largest state-owned banks, such as “Bank of Taiwan, “Land Bank of Taiwan”, “Taiwan Cooperative Bank”,”Mega International Commercial Bank Co., Ltd.”, “First Commercial Bank”,”Hua Nan Commercial Bank, Ltd.”,”Chang Hwa Commercial Bank”,”Taiwan Business Bank”, the small and medium-sized enterprise customer base accumulated by the eight major banks for many years will be temporarily eliminated. It will take some time for other private banks to catch up.
Among the eight major banks, First Bank is the first bank with the largest volume of lending business to small and medium-sized enterprises. The bank has surpassed Taiwan Cooperative Bank to occupy the first place in the rankings for 14 years since October 2010.
In 2023 At the end of December, the loan balance exceeded NT$925.7 billion, which is NT$94.7 billion more than the second-placed combined treasury. It is estimated that it should still maintain its first place in 2024. (figure 1)
Figure 1: Comparison of loan balances for small and medium-sized enterprises in Taiwan at the end of 2023(Unit: million NT dollars)
2. Ranking analysis
As can be seen from Figure 1, the top 15 banks are listed based on the loan balance of small and medium-sized enterprises at the end of December 2023, and are divided into four levels with 800 billion yuan, 600 billion yuan and 400 billion yuan as the dividing points respectively (as shown in Table 1) ,
- There are two banks listed in A-level, namely ‘First Commercial Bank’ and ‘Taiwan Cooperative Bank’;
- There are 5 banks listed in Grade B, namely ‘Taiwan Business Bank’, ‘Hua Nan Commercial Bank’, ‘Mega International Commercial Bank’, ‘Chang Hua Commercial Bank’, and ‘Land Bank of Taiwan’;
- There are two banks listed in C-level, namely ‘E. Sun Commercial Bank’ and ‘Bank of Taiwan’;
- There are 6 banks included in the D grade, namely ‘CTBC Bank’, ‘Taipei Fubon Commercial Bank’, ‘Bank SinoPac’, ‘Cathay United Bank’, ‘The Shanghai Commercial & Savings Bank’, and ‘Taishin International Bank’.
Table 1: Grading table of loan balances for small and medium-sized enterprises in Taiwan banks at the end of December 2023
| Grade | Numbers of Banks | loan amount outstanding range | Banks |
| A | 2 | >NT$800 B | ‘First Commercial Bank’ and ‘Taiwan Cooperative Bank’; |
| B | 5 | NT$600 B- NT$800 B | ‘Taiwan Business Bank’, ‘Hua Nan Commercial Bank’, ‘Mega International Commercial Bank’, ‘Chang Hua Commercial Bank’, and ‘Land Bank of Taiwan’; |
| C | 2 | NT$400 B- NT$600 B | ‘E. Sun Commercial Bank’ and ‘Bank of Taiwan’; |
| D | 6 | NT$200 B- NT$400 B | ‘CTBC Bank’, ‘Taipei Fubon Commercial Bank’, ‘Bank SinoPac’, ‘Cathay United Bank’, ‘The Shanghai Commercial & Savings Bank’, and ‘Taishin International Bank’. |
Among them, the six banks classified as D have little difference in balance between each other. They are fighting against each other. It is very likely that they will overtake each other in the short term.
The balance gap between ‘CTBC Bank’ and ‘Taipei Fubon Bank’ is about 3 billion ; the balance gap between ‘Bank SinoPac’ and ‘Cathay United Bank’ is about 1 billion; the balance gap between ‘Shanghai Commercial Bank’ and ‘Taishin Bank’ is about 1.5 billion.
The rankings move up and down every month, and individual banks need to work harder to stand out.
3. ‘E.Sun Bank’ deserves encouragement
In fact, it is not easy to enter the top eight. This is because the “threshold of stat-owned banks” known as the iron wall stands in the way. However, when the iron plate may be broken, it is worth mentioning ‘E. Sun Bank’.
In March 2018, it once broke through the Macedonian defense line of state-owned banks and became the eighth strongest, but it was not stable. After fighting with ‘Bank of Taiwan’ for 20 months, it has steadily occupied the eighth strongest position.
Since November 2019, it has steadily occupied the eighth position, becoming the eighth strongest bank. It is also the first bank to break through the Macedonian defense line. It is also an anticipated bank in the field of small and medium-sized enterprise lending.
Duration of ranking TOP 1
From 2004 to 2005, ‘Taiwan Cooperative Bank’ and ‘First Commercial Bank’ competed for the first place; from May 2006 to September 2010, it was the cooperative bank, which held the first place for more than 4 years; but from October 2010 ~ December 2023, First Bank has firmly topped the list for 14 years. At the end of 2023, the gap between the two was 94.7 billion. It will be very difficult for ‘Taiwan Cooperative Bank’ to surpass ‘First Commercial Bank’ in the short term.
Small and medium-sized enterprise(SME) loan balance as a proportion of domestic loans
In addition to the large scale of business volume for SME lending, it is also necessary to examine the size of the “proportion of SME lending to domestic loans”. This proportion represents the bank’s strategic position and business planning direction for SME business.
As can be seen from Table 2, In addition to ranking first in business volume, First Commercial Bank’s “small and medium-sized enterprise loan balance accounted for domestic loans” was 45.34%, ranking seventh, which shows the bank’s determination to develop small and medium-sized enterprise lending.
‘Taiwan Business Bank’ itself is a bank that was born to serve small and medium-sized enterprises. It is normal for the proportion to reach 56.55%, ranking second; as for the bank that accounts for the first place, ‘Kings Town Bank’, due to its small business scale, although it accounts for The ratio reached 65.43% and can be included in the follow-up observation list.
Table 2: Analysis of loan balance to small and medium-sized enterprises(SME) as a percentage of loans in 2023(Unit: million NT dollars)
| 2022/12/31 | 2023/12 | ||||
| Bank | SME loan outstanding | ％* | SME loan outstanding | ％ | Rank |
| First Commercial Bank | 930,041 | 48.13 | 925,781 | 45.34 | 7 |
| Taiwan Cooperative Bank | 829,482 | 35.01 | 830,999 | 32.18 | 14 |
| Taiwan Business Bank | 731,943 | 56.99 | 773,831 | 56.55 | 2 |
| Hua Nan Commercial Bank | 693,189 | 38.55 | 763,784 | 38.49 | 11 |
| Mega International Commercial Bank | 621,654 | 40.32 | 649,573 | 39.82 | 8 |
| Chang Hua Commercial Bank | 570,133 | 38.61 | 625,770 | 39.34 | 9 |
| Land Bank of Taiwan | 610,686 | 28.43 | 616,789 | 28.64 | 16 |
| E. Sun Commercial Bank | 507,230 | 31.44 | 559,448 | 32.07 | 15 |
| Bank of Taiwan | 457,532 | 13.94 | 457,805 | 15.26 | 28 |
| CTBC Bank | 325,582 | 15.61 | 346,290 | 14.96 | 29 |
| Taipei Fubon Commercial Bank | 271,575 | 18.20 | 343,314 | 19.23 | 24 |
| Bank SinoPac | 303,079 | 28.38 | 325,096 | 27.87 | 17 |
| Cathay United Bank | 304,166 | 16.84 | 324,048 | 15.90 | 27 |
| The Shanghai Commercial & Savings Bank | 270,462 | 38.87 | 282,882 | 38.10 | 12 |
| Taishin International Bank | 257,619 | 21.56 | 281,381 | 21.48 | 23 |
| Sunny Bank | 212,023 | 48.30 | 223,276 | 47.56 | 4 |
| Taichung Commercial Bank | 193,254 | 39.56 | 199,684 | 38.79 | 10 |
| Yuanta Commercial Bank | 171,995 | 18.46 | 188,012 | 18.21 | 26 |
| Taiwan Shin Kong Commercial Bank | 163,956 | 23.63 | 181,689 | 24.33 | 22 |
| Union Bank of Taiwan | 131,819 | 25.19 | 147,998 | 26.33 | 19 |
| Kings Town Bank | 148,640 | 64.14 | 144,766 | 65.43 | 1 |
| Bank of Panhsin | 86,420 | 48.68 | 96,646 | 50.28 | 3 |
| Bank of Kaohsiung | 71,942 | 44.88 | 79,014 | 47.30 | 6 |
| Hwatai Bank | 63,091 | 47.30 | 71,721 | 47.33 | 5 |
| KGI Bank | 54,528 | 17.23 | 61,507 | 18.80 | 25 |
| Far Eastern International Bank | 60,104 | 15.42 | 59,409 | 14.16 | 30 |
| Entie Commercial Bank | 47,427 | 24.15 | 50,844 | 25.45 | 21 |
| Cota Bank | 36,712 | 27.90 | 35,922 | 27.03 | 18 |
| O-Bank | 31,805 | 24.53 | 35,519 | 26.30 | 20 |
| HSBC Bank(Taiwan) | 24,033 | 8.88 | 24,582 | 8.79 | 33 |
| DBS Bank (Taiwan) | 27,325 | 11.00 | 23,618 | 5.18 | 34 |
| Taipei Star Bank | 18,627 | 33.49 | 18,074 | 32.56 | 13 |
| The Export-Import Bank of The Republic of China | 8,949 | 8.55 | 9,688 | 8.92 | 32 |
| Citibank Taiwan | 6,173 | 2.37 | 5,392 | 9.58 | 31 |
| Standard Chartered Bank (Taiwan) | 4,579 | 1.76 | 2,275 | 0.84 | 35 |
| Jih Sun International Bank(Merged by Taipei Fubon Bank on 2023/4) | 35,501 | 21.32 | － | － |
Note: * “Balance of loans to small and medium-sized enterprises”(SME) as a percentage of loans refers to the percentage of loans (including collections) of each bank’s domestic branch.
Conclusion
- Based on the above points, ‘First Commercial Bank’ performs very well in terms of “business volume scale”, “duration of top 1 in the rankings” and “small and medium-sized enterprise loan balance as a proportion of domestic loans”.
- Small and medium-sized business (SME)owners may consider dealing with this type of bank.
- Develop inclusive finance, treat small and medium-sized enterprises(SME) well, promote sustainable development and create a better living environment. This is the direction of the efforts of the competent authorities and banks. This article provides some figures for your reference. For those who perform well, Bank, we should give more encouragement and applause.
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