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Fitch Assigns TLG Capital First-Time 'AA-(twn)' Rating; Outlook Stable
November 14, 2017 / 3:53 AM / in 6 days

Fitch Assigns TLG Capital First-Time 'AA-(twn)' Rating; Outlook Stable

(The following statement was released by the rating agency) TAIPEI, November 13 (Fitch) Fitch Ratings has assigned TLG Capital Company Limited (TLG Capital) a first time National Long-Term Rating of 'AA-(twn)' and a National Short-Term Rating of 'F1+(twn)'. The Outlook is Stable. TLG Capital became part of CTBC group when CTBC Financial Holding Co., Ltd. (CTBC Holding, A-/AA(twn)/Stable) acquired Taiwan Life Insurance Co., Ltd. (Taiwan Life, Insurer Financial Strength: A-/AA(twn)/Stable) in 2015. TLG Capital was founded and fully owned by Taiwan Life to supplement the life insurer's lending business with flexible leasing products. CTBC Holding's consolidated assets comprised of 72% by CTBC Bank Co., Ltd. (A/AA+(twn)/Stable) and 28% by Taiwan Life at end-1H17. See our latest rating action commentary on CTBC group, <a href="https://www.fitchratings.com/site/pr/1029398">Fitch Affirms CTBC Bank; Downgrades CTBC Holding and Taiwan Life, dated 20 September 2017. KEY RATING DRIVERS TLG Capital's National Ratings are driven by institutional support and reflect Fitch's belief of a high propensity of support from its ultimate parent, CTBC Holding, if needed. The National Long-Term Rating is rated one notch below that of CTBC Holding, as Fitch believes there is a high probability for support from CTBC Holding to Taiwan Life to flow through to TLG Capital. This is based on the potentially significant negative impact of a subsidiary default on the group's franchise and reputation as the market sees the 'Taiwan Life' brand as the other brand of CTBC group. Fitch believes TLG Capital plays a strategic role in supplementing the lending business of the group's banking and life subsidiaries, although synergies remain limited. We see the level of integration between TLG Capital and CTBC group as moderately high, as TLG Capital has adopted the group-wide underwriting standard and risk-management framework. However, the company has maintained significant management independence. TLG Capital's loan portfolio comprised of 74% in auto and 26% in manufacturing, retail and other sectors at end-1H17. Its impaired ratio stood at 0.7%, with impairments well covered by a loan loss reserve that stood at 169%. The company has consistently remained profitable over the previous decade. All borrowings are short term, thus the company faces a significant negative short-term funding gap. The Outlook is aligned with the Stable Outlook of CTBC Holding. RATING SENSITIVITIES Any change to the ratings of its ultimate parent, CTBC Holding, whether positive or negative, will affect the ratings of TLG Capital to the same magnitude. For the rating sensitives of CTBC Holding, please see our latest rating action commentary, <a href="https://www.fitchratings.com/site/pr/1029398 ">Fitch Affirms CTBC Bank; Downgrades CTBC Holding and Taiwan Life, dated 20 September 2017. TLG Capital's ratings are also sensitive to a change in Fitch's assumptions around CTBC Holding's propensity to support the subsidiary. An increase in the significance of TLG Capital's role in the group or strengthened managerial and operational integration could lead to an upgrade, although this appears less likely in the near-term given that synergies remain evolving. Conversely, TLG Capital's rating may be downgraded from any weakening in the integration between TLG Capital and CTBC Holding. Contact: Primary Analyst Shirley Hsu Associate Director +886 2 8175 7606 Fitch Australia Pty Ltd, Taiwan Branch Suite 1306, 13F, Tun Hwa North Road Taipei City, Taiwan 105 Secondary Analyst Sophia Chen, CFA Director +886 2 8175 7604 Committee Chairperson Parson Singha Senior Director +66 2108 0151 Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(twn)' for National ratings in Taiwan. Specific letter grades are not therefore internationally comparable. Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. 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