(The following statement was released by the rating agency)
TAIPEI/SINGAPORE, March 20 (Fitch) Fitch Ratings has affirmed
Bills Finance Corporation's (CBF) Long-Term Issuer Default
Rating (IDR) at
'BBB'. The Outlook is Stable. The other ratings on the company
have also been
affirmed. A full list of rating actions is provided at the end
KEY RATING DRIVERS - IDRs, National Ratings and VRs
The affirmation reflects CBF's strong franchise in the Taiwanese
sector, sound asset quality and adequate capitalisation. The
tempered by sector-wide structural issues, including limited
business scope, a
business model that is reliant on wholesale funding, and
susceptibility to sharp
changes in interest rates.
Fitch believes CBF's spread revenue and trading gains are likely
constrained in the current low interest rate environment. CBF
earnings growth for 9M13, with annualised return on equity at
7.7%, aided by a
one-off recovery and increased guarantee volumes. CBF's modest
ratio of 3.7x at end-2013 suggests a moderate appetite for
credit risk. It has
low impaired exposures (end-2013: 0% of total guarantees) and is
protected by a
comfortable provision coverage.
CBF actively manages its liquidity and funding. It moderates
risk by using high-quality securities as collateral against
maintaining large and stable bank lines. Fitch expects CBF to
maintain a sound
capital profile commensurate with its risk exposure. Its Fitch
ratio has been stable and stood at around 13.8% at end-2013.
RATING SENSITIVITIES - IDRs, National Ratings and VRs
CBF's ratings have limited upside potential because of the
constraints on its business model. Weakened loss absorption
in any notable decline in its equity base and/or capitalisation
would lead to a
downgrade. Any deterioration in asset quality, possibly from
risk-taking, could also lead to negative rating action. That
said, Fitch views
both scenarios as unlikely in the near term.
A merger with its largest shareholder, Industrial Bank of
Taiwan, is likely to
have a negative impact on CBF's ratings, because the latter has
a weaker risk
profile. Such a merger appears increasingly likely over the next
KEY RATING DRIVERS AND SENSITIVITIES - SR and SRF
CBF's Support Rating (SR) and Support Rating Floor (SRF) reflect
probability of government support, if needed. The SR and SRF are
sensitive to changes in assumptions around the propensity or
government to provide timely support to CBF. This would most
manifested in a change to Taiwan's sovereign rating (A+/Stable).
Established in 1978, CBF is Taiwan's third-largest bills finance
company, with a
17.9% of market share of guarantees at end-2013.
The full list of rating actions follows:
Long-Term IDR affirmed at 'BBB'; Outlook Stable
Short-Term IDR affirmed at 'F3'
National Long-Term Rating affirmed at 'A+(twn)'; Outlook Stable
National Short-Term Rating affirmed at 'F1(twn)'
Viability Rating affirmed at 'bbb'
Support Rating affirmed at '4'
Support Rating Floor affirmed at B+'
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Note to editors: Fitch's National ratings provide a relative
creditworthiness for rated entities in countries with relatively
international sovereign ratings and where there is demand for
such ratings. The
best risk within a country is rated 'AAA' and other credits are
relative to this risk. National ratings are designed for use
mainly by local
investors in local markets and are signified by the addition of
for the country concerned, such as 'AAA(twn)' for National
ratings in Taiwan.
Specific letter grades are not therefore internationally
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Global Financial Institutions Rating
Criteria', dated 15
August 2012, 'National Scale Ratings Criteria', dated 30 October
'Finance and Leasing Companies Criteria', dated 11 December
2012, are available
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
National Scale Ratings Criteria
Finance and Leasing Companies Criteria
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