(The following was released by the rating agency)
TAIPEI/SYDNEY, October 03 (Fitch) Fitch Ratings has affirmed
Taiwan-based Bank SinoPac's (BSP) Issuer Default Rating (IDR) at
'BBB' and its parent SinoPac Financial Holdings' (SPH) IDR at
'BBB-', both with Stable Outlook. A full rating breakdown is
provided at the end of this comment.
The affirmation reflects the stable banking franchise of
SinoPac Group (SPH and its wholly-owned subsidiaries including
BSP), improved earnings at the banking subsidiary and continuing
modest leverage at the holding parent. They also factor in the
group's comparably moderate internal capital generation in Asia
Pacific and volatile earnings at the securities subsidiary,
SinoPac Securities (SPS). The Stable Outlook underlines Fitch's
expectation that the group will maintain its stable credit
profile and contain credit losses through the global economic
Significant and sustainable improvement in risk-adjusted
core earnings and strengthening of capitalisation may benefit
BSP's ratings. On the other hand, BSP's concentrated
property-related exposures may undermine ratings if the property
market reverses markedly. Significant asset quality
deterioration and weakening capitalisation arising from
aggressive growth in corporate finance, particularly in
association with China, may also lead to a rating downgrade. The
ratings of SPH are mostly driven by the credit profile of its
principal operating subsidiary, BSP.
BSP regained its earnings momentum and posted annualised
return of equity of 11% for H112 versus 3.6% for 2011, due to
easing credit costs amid a benign credit cycle and clean-up of
problematic commercial real estate exposures at its U.S.
subsidiary, Far Eastern National Bank. The bank's asset quality
accordingly improved; its 90-day non-performing loan (NPL) ratio
was 0.38% at end-H112, down from 0.47% at end 2011. However,
Fitch expects earnings momentum for BSP to moderate in 2012-2013
as a weak economic outlook weighs on the bank's asset quality.
BSP's capitalisation remains moderate by regional comparison
but is, in Fitch's view, appropriate for its risk profile. This,
coupled with its mildly improved provisioning, should assist the
bank in weathering moderate external shocks. BSP's liquidity
profile should remain stable given its resilient deposit
franchise and adequate liquidity management.
Founded in 2002, SPH is a medium-sized bank holding company
with consolidated assets of TWD1.32trn at end-H112. It provides
diversified financial services through its two major
subsidiaries, BSP and SPS, and five small subsidiaries in other
financial sectors. BSP has 129 branches and commanded a 3.57%
market share in deposits at end-H112. Taiwan-based conglomerate,
Yong Foong Yu Group and its majority owner, Show Chung Ho,
through his investment vehicles, are the group's largest
shareholders and control six out of 12 board seats.
A Credit Update on SPH and a Credit Analysis on BSP will be
published shortly on 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 'A+(twn)'; Outlook
National Short-Term rating: affirmed at 'F1+(twn)'
Viability Rating: affirmed at 'bbb'
Support Rating: affirmed at '3'
Support Rating Floor: affirmed at 'BB+'
Long-Term IDR: affirmed at 'BBB-'; Outlook Stable
Short-Term IDR: affirmed at 'F3'
National Long-Term rating: affirmed at 'A(twn)'; Outlook
National Short-Term rating: affirmed at 'F1(twn)'
Viability Rating: affirmed at 'bbb-'
Support Rating: affirmed at '5'