Fitch Affirms and Withdraws Taiwan Cooperative Bank Ratings

Sun May 18, 2014 11:19pm EDT

Related Topics

(The following statement was released by the rating agency) TAIPEI/SINGAPORE, May 18 (Fitch) Fitch Ratings has affirmed the ratings of Taiwan Cooperative Bank's (TCB) and its affiliated companies, Taiwan Cooperative Bills Finance Company (TCBFC) and Taiwan Cooperative Securities (TCS), with Stable Outlook. The ratings and outlook of TCB are simultaneously withdrawn as they are no longer considered relevant to the agency's rating coverage. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS - IDRS, NATIONAL RATINGS, SR AND SRF TCB's IDRs, National Ratings, Support Rating (SR) and Support Rating Floor (SRF) reflect Fitch's view of an extremely high probability of government support, in the case of need. This is underpinned by TCB's systemic importance in Taiwan's banking sector and a high level of government control through its only shareholder - Taiwan Cooperative Financial Holding Company (TCFHC). TCB is the second-largest bank in Taiwan by assets and it had a sizable deposit market share of about 7.7% as at end-2013. State and state affiliates own nearly 40% in TCFHC, mostly through the Ministry of Finance. The ratings of TCFHC's wholly owned subsidiaries TCBFC and TCS are driven by support from TCFHC, and underpinned by TCFHC's strong commitment and legal obligation under the Financial Holding Act to assist its subsidiaries when they fall into financial difficulty. Fitch views them as core subsidiaries in spite of their modest representation in the group's assets at 1% at end-2013. This is based on strong management and strategic integration, and brand sharing. TCBFC handles the group's fixed-income trading, commercial-paper underwriting and guarantee while TCS focuses on securities brokerage primarily for TCB's customers. TCB, TCBFC and TCS all have Stable Outlooks, reflecting that of the Taiwan sovereign (A+/Stable) and Fitch's expectation that the state's ability or propensity to support them will not weaken. RATING SENSITIVITIES - IDRS, NATIONAL RATINGS, AND SUPPORT RATING TCBFC's and TCS's ratings are sensitive to changes around group support, including if sovereign support for TCB declines and if Fitch no longer views them as core entities. KEY RATING DRIVERS - VIABILITY RATING TCB's Viability Rating (VR) reflects its strong domestic franchise, ordinary support from the state, as well as its below-peer average capitalisation. Compared with regional peers, TCB's VR reflects its weak earnings generation and the need to pay steady dividends to the government. KEY RATING DRIVERS - SENIOR DEBT AND SUBORDINATED DEBT TCB's subordinated bonds are rated one notch below its National Long-Term rating to reflect their subordinated status and the absence of going-concern loss absorption features. TCB's perpetual cumulative bonds (that is, legacy Basel II Tier 2 capital instruments) are rated three notches below its VR to reflect the instrument's going-concern loss absorption feature. These are in line with Fitch's criteria on rating bank regulatory capital and similar securities. A Credit Update on TCBFC and TCS will be available shortly on www.fitchratings.com. The rating actions are as follows: TCB: Long-Term IDR affirmed at 'A-'; Outlook Stable; withdrawn Short-Term IDR affirmed at 'F1'; withdrawn National Long-Term rating affirmed at 'AA(twn)'; Outlook Stable; withdrawn National Short-Term rating affirmed at 'F1+(twn)'; withdrawn Viability Rating affirmed at 'bb+'; withdrawn Support Rating affirmed at '1'; withdrawn Support Rating Floor affirmed at 'A-'; withdrawn Subordinated bonds affirmed at 'AA-(twn)'; withdrawn Perpetual cumulative bonds affirmed at 'BBB-(twn)'; withdrawn TCBFC: Long-Term IDR affirmed at 'A-'; Outlook Stable Short-Term IDR affirmed at 'F1' National Long-Term rating affirmed at 'AA(twn)'; Outlook Stable National Short-Term rating affirmed at 'F1+(twn)' Support Rating affirmed at '1' TCS: National Long-Term rating affirmed at 'AA(twn)'; Outlook Stable National Short-Term rating affirmed at 'F1+(twn)' Contact: Primary Analyst Cherry Huang, CFA Director +886 2 8175 7603 Fitch Ratings Limited, Taiwan Branch Suite 1306, 13F, Tun Hwa N. Rd., Taipei Secondary Analyst Jenifer Chou Associate Director +886 2 8175 7605 Committee Chairperson Mark Young Managing Director +65 6796 7229 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 1 January 2014, 'National Scale Ratings Criteria', dated 30 October 2013, 'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria', dated 31 January 2014 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here National Scale Ratings Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.