(Repeat for additional subscribers)
Jan 21 (The following statement was released by the rating agency)
Fitch Ratings has affirmed
Taiwan-based Mega International Commercial Bank Company Limiteda€™s (Mega ICBC)
Long-Term Issuer Default Rating (IDR) at a€˜A-a€™ and its National Long-Term Rating
at 'AA(twn)'. The Outlook is Stable. A full rating breakdown is provided at the
end of the commentary.
KEY RATING DRIVERS a€“ IDRs, VR and NATIONAL RATINGS
Mega ICBCa€™s Viability Rating (VR) reflects the banka€™s strong domestic franchise
in foreign exchange and trade finance, its ability to maintain comparably stable
earnings through the cycle and healthy liquidity. The rating is constrained by
Mega ICBCa€™s concentrated loan portfolio and moderate capital buffer compared
with similarly rated regional peers. The banka€™s IDRs and National Ratings take
into account the extremely high probability of government support, if needed, as
reflected in its Support Rating (SR) of a€˜1a€™ and Support Rating Floor (SRF) of
Mega ICBCa€™s overall offshore exposures remained stable relative to its total
assets but exposure to China increased rapidly in the past two years. Fitch
expects Mega ICBC to be able to manage the rising impact of China-related
exposures in the near- to medium term. This is because the exposure mainly
relates to short-term trade financing, loans to Taiwanese companies operating in
China that it already has established relationships with and the reasonable
quality of its counterparties and investments in China. Nonetheless, with the
continued regulatory liberalisation of banking policies between Taiwan and
China, the China exposure is likely to have material impact on the banka€™s risk
profile over the longer term.
In Fitcha€™s view, the notable increase in construction loans in the past three
years and the existing exposures to some financially weak technology companies
have the potential to hurt Mega ICBCa€™s overall asset quality because of a
softening outlook for the property market and weak economic recovery.
Nevertheless, a marked erosion of capital is not likely given the banka€™s focus
on leading property developersa€™ projects in prime metropolitan areas, generally
conservative loan-to-value ratios at origination and enhanced loan loss
RATING SENSITIVITIES a€“ IDRs, VR and NATIONAL RATINGS
Any meaningful increase in risk profile due to growth in offshore assets and/or
property sector loans, which are of higher risk, would pressure Mega ICBCa€™s VR.
A downgrade of IDRs and National Ratings would be unlikely, given the banka€™s
Support Rating of a€˜1a€™ and Support Rating Floor of a€˜A-a€™. The prospect of positive
rating action for the VR is limited considering the banka€™s already high rating
and the very competitive domestic banking market.
RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING
Mega ICBCa€™s SR and SRF are affirmed at a€˜1a€™ and a€˜A-a€™, respectively, reflecting
the extremely high probability of state support for the bank if necessary,
because it is the only bank to provide US dollar settlement services in Taiwan,
it has a significant 6% market share of deposits and it is subject to
significant government influence. The SR and SRF are sensitive to any change in
assumptions around the propensity or ability of the Taiwan government to provide
timely support to the bank. This would most likely be manifested in a change to
Taiwan's sovereign rating (A+/Stable).
The detailed list of rating actions is as follows:
- Long-Term IDR affirmed at 'A-'; 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 'a-'
- Support Rating affirmed at '1'
- Support Rating Floor affirmed at 'A-'