Fitch Ratings has assigned ratings to Taiwan's First Financial Holding Co., Ltd. (FFHC) and affirmed those of its wholly-owned subsidiary First Commercial Bank (Taiwan) (FCB). Simultaneously, Fitch has revised the rating Outlook on FCB's Long-term foreign currency Issuer Default Rating (IDR) and National Long-term Rating to Stable from Positive, to account for the potential impact from the ongoing US-led global credit crisis. The ratings are as follows:
FFHC: Long-term foreign currency IDR 'BBB+', Short-term foreign currency IDR 'F2', National Long-term rating 'AA-(twn)' (AA minus(twn)), National Short-term rating 'F1(twn)', Individual 'C', Support '5' and Support Rating Floor 'NF'. The Outlooks on the IDR and National Long-term ratings are Stable. FCB: Long-term foreign currency IDR affirmed at 'BBB+', Short-term foreign currency IDR 'F2', National Long-term rating 'AA-(twn)' (AA minus (twn)), National Short-term rating 'F1(twn)', Individual 'C', Support '2' and Support Rating Floor 'BBB+'. The Outlooks on the IDR and National Long-term ratings are revised to Stable from Positive. FFHC's ratings reflect its reasonable profitability, good asset quality, low leverage and adequate capitalisation. The company aims to become a leading financial institution in the Greater China markets by enhancing its subsidiaries' organic growth and conducting acquisitions that complement its current business scope or expansion, in terms of operating scale. As such, its principal subsidiary, FCB, has continued to expand its overseas banking activities, wealth management business and sales of treasury products, in efforts to achieve better core profitability and revenue diversity. Fitch notes that FFHC - which offers a full range of services in banking, securities brokerage, investment trust, asset management, venture capital and life insurance - is also focusing on exploiting cross-selling opportunities among its subsidiaries to bolster the group's productivity. FCB's Individual rating and IDR primarily reflect its steadily improved core profitability and earning quality, good asset quality, strong liquidity and adequate capitalisation. The ratings also consider the bank's relatively weak core profitability among investment-grade rated banks in Asia. Despite lower fees from its wealth management business following the sharp corrections in the global stock market, FCB's earning performance remained good in H108. Fitch views that a modest loan growth, coupled with a steady loan spread and well contained bad loan provisioning, should support reasonable bottom-line profits for FCB in 2008. Although the agency notes that an economic downturn will inevitably lead to a deterioration of FCB's loan book, the downside risk should be manageable given FCB's improved credit risk management and healthy financial profile. FCB has strong liquidity profile. It has a large domestic deposit-taking franchise and is a major liquidity provider in Taiwan's interbank market. The bank is adequately capitalised with Tier 1 and capital adequacy ratios of 7.0% and 10.8% respectively at end-June 2008. FFHC was incorporated in January 2003 through a 100% share swap with FCB. FFHC was the seventh-largest of the 15 domestic financial holding companies by consolidated assets (TWD1.7trn) at end-June 2008. Government agencies maintain a dominant ownership (around 32.1%) of FFHC and appointed the majority of board of directors. Meanwhile, FCB was created in 1899 and is one of three major state-affiliated money-centre commercial banks in Taiwan. It is Taiwan's fifth-largest bank in terms of asset size with a market share of 6% in deposits and a network of 190 domestic and 14 overseas branches.
--www.theasianbanker.com (October 10 2008)--