September 29, 2017 / 9:06 AM / a year ago

Fitch Downgrades Citibank Taiwan to 'A-'; Outlook Stable

(The following statement was released by the rating agency) TAIPEI, September 29 (Fitch) Fitch Ratings has today downgraded Citibank Taiwan Limited's (CTL) Long-Term Issuer Default Rating (IDR) to 'A-' from 'A' and National Long-Term Rating to 'AA(twn)' from 'AA+(twn)'. At the same time, the agency has affirmed CTL's Viability Rating (VR) at 'bbb+'. A full list of rating actions is at the end of this rating action commentary. The downgrade reflects Fitch's belief that it will be less of a priority for CTL's parent, Citibank N.A. (A+/Stable/a), and ultimate parent, Citigroup Inc., (Citi, A/Stable/a) to support CTL, if required, under the group's resolution and recovery plan. Like most of Citigroup's international subsidiaries, CTL has not been specifically named as a Material Legal Entity (MLE) in the plan. CTL's IDR is now one notch below the common VR of Citibank N.A. and Citi. KEY RATING DRIVERS IDRS, NATIONAL RATINGS AND SUPPORT RATING The IDR and Support Rating of '1' on CTL reflect our view that there is still an extremely high probability of CTL receiving support from its parent, if needed, as CTL has strong synergy with the parent in providing products and services in Taiwan, which the parent views as a strategically important market within the group's international banking operations. The strong support hinges on the high reputational risks for the parent should the Taiwan subsidiary be allowed to default. CTL is highly integrated with the parent in terms of risk management and shared brand name, while retaining some management independence for local business operations. The bank's National Long-Term Rating remains at the relatively high end of the national rating scale, reflecting low default risk relative to domestic peers due to parent support, if needed. The Stable Outlook of CTL is in line with that of its ultimate parent, Citi (see <a href="">Fitch Affirms Citigroup's Long-Term IDR at 'A'; Outlook Stable, dated 28 September 2017 for more details). VR CTL's VR reflects a niche, sustainable and profitable franchise with sound capitalisation relative to its risk profile. This is underpinned by the local management's ability to use Citibank's global platform and brand recognition in Taiwan to consistently deliver earnings that are in line with its peers' average. CTL has developed its niches in cross-border financing, cash management, trade finance, financial advisory in M&A and introducing innovative wealth management and credit card products in Taiwan. Fitch expects CTL's operating profit/risk-weighted assets to remain stable at around 2.6% for one to two years due to modest loan growth prospects and wider margins in US dollar loans, which accounted for around half of its loan book and benefitted from the Fed rate hike. There was a modest rise in its impaired loan ratio to 1.9% at end-1H17 (1.6% at end-2015) primarily led by unsecured personal loans (UPL). Credit losses from its UPL book were aligned with expected losses and returns on the loans remained satisfactory at around 2%. Strong internal capital generation would provide CTL a sufficient buffer for moderate growth in risk assets. Fitch expects its capitalisation to remain strong and at the top end of Taiwanese banks. Its Fitch Core Capital ratio was stable at 12.6% at end-1H17 (sector average near 11%), versus 12.1% at end-2016. The ratio would be around 15% after adjusting for higher capital charges for mortgages in Taiwan, comparable with similarly rated international peers. The bank maintained substantial high-quality liquid assets and reported a strong Basel III liquidity coverage ratio of 169% at end-1Q17 versus the sector average of 137%. RATING SENSITIVITIES IDRS, NATIONAL RATINGS AND SUPPORT RATING CTL's IDR, National Ratings and Support Rating are sensitive to any change in the ability and propensity of Citibank N.A. to provide timely support to CTL. A change in Citigroup's resolution plan could prompt us to reassess the parent's ability or propensity to support CTL, which, however, is less likely to occur in the near term. CTL's National Ratings are also sensitive to a change in Taiwan's sovereign ratings. An upgrade of the sovereign's 'AA-' Long-Term Local-Currency IDR may lead to CTL's National Rating being downgraded. A downgrade is unlikely to occur in the near term, given the Stable Outlook on Taiwan's IDRs. VR The bank's VR could be upgraded if its franchise strengthens notably including market positions in deposit-taking and lending. A VR downgrade could result from unexpected deterioration in capitalisation due to excessive loan growth, or a weakening risk profile particularly in high-risk unsecured personal loans. The rating actions are as follows: CTL Long-Term IDR downgraded to 'A-' from 'A'; Outlook Stable Short-Term IDR affirmed at 'F1' National Long-Term Rating downgraded to 'AA(twn)' from 'AA+(twn)'; Outlook Stable National Short-Term Rating affirmed at 'F1+(twn)' Viability Rating affirmed at 'bbb+' Support Rating affirmed at '1' Primary Analyst Cherry Huang, CFA Director +886 2 8175 7603 Fitch Australia Pty Ltd, Taiwan Branch Suite 1306, 13F, Tun Hwa N. Rd., Taipei Secondary Analyst Shirley Hsu Associate Director +886 2 8175 7606 Committee Chairperson Parson Singha Senior Director +66 2108 0151 Summary of Financial Statement Adjustments: The following assumptions were made in analysing the banks' Fitch Core Capital ratios; Taiwan's regulator uses the standardised approach and imposes higher risk weights on mortgage than regulators in most other developed markets. We have considered the potential effect of these higher risk weights on the banks' Fitch Core Capital ratios compared with international peers that use lower mortgage risk weights. Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: 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. Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here National Scale Ratings Criteria (pub. 07 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below