TAIPEI/SINGAPORE, February 07 (Fitch) Fitch Ratings has revised Standard Chartered Bank (Taiwan) Limited (SCBTL)'s Outlook to Stable from Negative and affirmed its Long-term Issuer Default Rating (IDR) at 'AA-'. A rating breakdown is provided below.
Rating Action Rationale
The rating action follows that of Standard Chartered Bank (SCB) on 7 February 2013 (see 'Fitch Revises Standard Chartered's Outlook to Stable; Affirms 'AA-'' at www.fitchratings.com). SCB is the parent and sole owner of SCBTL.
SCBTL's IDRs are aligned with those of SCB as Fitch views SCBTL as a core subsidiary within the group's international network. This is supported by their aligned risk management, a shared brand name and operational support from SCB.
SCBTL's Viability Rating reflects its adequate balance sheet strength, prudently managed asset quality and renewed earnings momentum following the removal of legacy problem loans from Hsinchu International Bank (HIB) which SCB acquired in 2006.
Rating Drivers and Sensitivities - IDR and VR
Any rating action on SCB's IDRs could trigger a similar rating action on SCBTL. Meanwhile, SCBTL's VR may be upgraded if the bank demonstrates an ability to contain asset quality deterioration during a cyclical downturn and to greatly enhance internal capital generation on a sustained basis. The rating may be downgraded if its mortgage portfolio, accounting for over 50% of its loan book, comes under pressure from an unexpected and sharp correction of the Taiwan property market.
Senior Unsecured and Subordinated Debt
SCBTL's senior unsecured bonds are rated at the same level as its National Long-Term rating, as they constitute direct, unconditional, unsecured and unsubordinated obligations of the bank. Its subordinated bonds are rated one notch below the issuer's National Long-Term rating, to reflect their subordinated status and the absence of going-concern loss-absorption feature. These notching practices are in accordance with Fitch's criteria on rating senior unsecured bond instruments and bank regulatory capital of financial institutions. Any rating action on SCBTL's Long-term Ratings could trigger a similar move on their debt ratings.
SCB acquired HIB in 2006 and renamed it SCBTL. SCBTL integrated SCB Taiwan Branch in 2007 and acquired American Express Bank Taiwan and Asia Trust in 2008. SCBTL has total assets of TWN719.8bn (USD25.7bn, over 4% of SCB group's total assets) and had a deposit market share of 1.92% in Taiwan at end-June-2012A Credit Update for SCBTL is available on www.fitchratings.com.
Standard Chartered Bank (Taiwan) Limited (SCBTL) ratings:
- Long-Term IDR: affirmed at 'AA-'; Outlook revised to Stable from Negative
- Short-Term IDR affirmed at 'F1+'
- National Long-Term rating: affirmed at 'AAA(twn)'; Stable Outlook
- National Short-Term rating affirmed at 'F1+(twn)'
- Viability Rating: affirmed at 'bbb'
- Support Rating affirmed at '1'
- Senior unsecured debt National Long-Term rating: affirmed at 'AAA(twn)'
- Subordinated debt National Long-Term rating: affirmed at 'AA+(twn)'
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