Taiwanese securities firms are aggressively entering the syndicated loan market, collectively aiming to secure approximately NT$166 billion ($5.26 billion) in what is described as a record year for the sector. This surge in borrowing is fueled by an equity rally that has more than doubled the island's stock market capitalization over the past year, propelling the Taiex index to an all-time high of over 45,000.
Market leader Yuanta Securities initially planned for a $318 million loan but has since scaled up its three-year loan plan to NT$25 billion, with its sister company Yuanta Securities Finance separately targeting a NT$10 billion three-year loan. Combined, the Yuanta Group is seeking NT$35 billion, making it the largest funding initiative in the current wave. Other prominent brokers like KGI Securities and Fubon Securities are each exploring NT$20 billion three-year facilities. Capital Securities and SinoPac Securities are also sounding out NT$20 billion loans each, while President Securities is seeking between NT$18 billion and NT$20 billion.
The demand for loans is largely driven by a significant increase in margin lending, which has topped NT$550 billion, compared to a range of NT$200 billion to NT$230 billion a year prior. Proprietary trading has also seen a substantial boost, with industry-wide first-quarter net profits reaching NT$48.27 billion, more than triple the NT$13.69 billion from the previous year. Brokerage commissions nearly doubled during the same period. This funding rush is raising concerns about bank lending limits, as local regulations cap unsecured exposure to a single borrower at 5% of a bank’s net worth, pushing some banks to decline lead roles in deals due to internal triggers being met.
Brokers are exploring all avenues for funding, including both bilateral and syndicated loans, and are lobbying regulators to ease capital expansion restrictions. The pricing for these three-year loans typically hovers around 40 basis points over the three-month Taibor, as exemplified by CTBC Securities. Some bilateral loans are offering better margins for banks, with pricing around 2.2%–2.3% compared to earlier rates of 1.8%–1.9%, indicating a doubling of the Taibor spread from 20bp to 50bp. Smaller brokers are urged to act quickly, as bank limits are expected to fill, and the most favorable balance sheets will be utilized, with banks often prioritizing existing relationships.
