(Repeat for additional Subscribers)
March 28 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Chang Hwa Bank's
(CHB) Long-Term Issuer Default Rating (IDR) at 'BBB+' with Stable Outlook. A
full list of rating actions can be found at the end of this rating action
RATING ACTION RATIONALE
The affirmations of CHB's ratings reflect no material change in the company's
credit profile. The ratings have taken account of government support,
improvements in asset quality, and profitability. Asset quality has been
consistently improving with a lower level of non-performing loans (NPL) and
higher loan loss reserves. As of end-2012, its loan loss reserve for general
loans has exceeded the latest regulatory guidance of 1%. Its single name
concentration is slightly higher relative to similarly rated peers, but Fitch
notes it is on a declining trend.
KEY RATING DRIVERS - IDRS, NATIONAL RATINGS, SUPPORT RATING, SUPPORT RATING
FLOOR, AND VR
The bank's IDRs and National Ratings are driven by its Support Rating (SR) of
'2' and Support Rating Floor (SRF) of 'BBB+', which reflects a high probability
of support from the state, if needed, as a result of its systemic importance and
long history of state ownership. CHB has 4.5% deposit market share through a
network of 184 domestic and 7 overseas branches.
CHB's VR has taken into account the bank's well-established franchise, improving
credit management, adequate capitalization, modest but gradually growing
profitability, and some degree of concentration within its loan portfolio
(albeit the largest exposures tend to be government or state-owned entities).
RATING SENSITIVITIES -IDRS, NATIONAL RATINGS, SUPPORT RATING, SUPPORT RATING
FLOOR, AND VR
An upgrade of the IDR is unlikely given it would require a two notch increase
from its current VR. Prospects of a downgrade are also limited as its IDR is
already at the Support Rating Floor (SRF) of 'BBB+', unless there is a decline
in the perceived willingness and propensity of state support. An upgrade of the
SR and SRF are unlikely in the near to medium term unless there is a higher
state ownership or notably increased policy role.
VR downward triggers include excessive loan growth among weaker borrower
segments and increased concentration in property sector, single names, or weak
tech sector leading to higher risk of credit and profitability deterioration and
weakened capitalization during down cycles. There may also be negative rating
action on the VR should the bank's ability to access new equity capital decline
due to pressures to avoid state ownership dilution.
KEY RATING DRIVERS - SUBORDINATED DEBT
CHB's subordinated debt is rated one notch below its National Long-Term rating,
reflecting its subordinated status and the absence of any going-concern
loss-absorption mechanism (such as coupon deferral under specified conditions).
RATING SENSITIVITIES - SUBORDINATED DEBT
Any rating action on CHB's National Long-Term rating is likely to trigger a
similar move in its debt ratings.
A Credit Update on CHB will shortly be available at www.fitchratings.com
The rating actions are as follows:
Long-Term IDR: affirmed at 'BBB+'; Outlook Stable
Short-Term IDR: affirmed at 'F2'
National Long-Term rating: affirmed at 'AA-(twn)'; Outlook Stable
National Short-Term rating: affirmed at 'F1+(twn)'
Viability Rating: affirmed at 'bbb'
Support Rating: affirmed at '2'
Support Rating Floor: affirmed at 'BBB+'
Subordinated bonds affirmed at 'A+(twn)'