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Fitch Ratings-Taipei/Hong Kong/Singapore-18 December 2008: Fitch Ratings has today affirmed Taipei Fubon Bank's (TFB) Individual rating at 'B/C' and Support rating at '3'.
TFB's Individual rating reflects its adequate profitability, good asset quality and sound capitalisation. Its Support rating considers the moderate probability of government support, given the banks's sizable market presence of 4.2% by deposits in Taiwan.
TFB's ROE improved in Q108-Q308 to an adequate level of 8.1% (annualised) due to decreased provisioning costs and steady pre-provision profits. The shift toward large corporate lending, after the consumer lending crisis in late 2005, led to the improvement in credit costs, albeit with increased concentration risk and compressed interest spreads. Good loan growth (up 14% in Q1-Q308) offset the impact of interest margin compression and fee revenues remained satisfactory.
Meanwhile, the bank maintained good asset quality. Total problem loan exposures accounted for only 0.7% of gross loans, and were provided for with adequate reserves at end-Q308. Capitalisation remains strong, with a Tier 1 ratio of 9.3% at end-H108.
TFB is one of Taiwan's leading private banks and the main earnings contributor for Fubon Financial Holding (Fubon). In October 2008, Fubon announced that it would fully acquire ING Group's Taiwanese life insurance subsidiary, ING Life Insurance Co. Ltd. (ING Taiwan) for USD600m. Fitch views the acquisition as positive in strengthening Fubon's life insurance franchise. Nonetheless, the agency understands that the capitalisation of many Taiwanese life insurers is under pressure after poor investment results in FY08 so far. Fitch also considers that the current weak economic conditions may impair TFB's asset quality, and lead to an increase in the bank's credit costs, dragging down its profitability. Negative developments in operating performance, particularly in asset quality, and capitalisation as a result of capital upstreaming to support Fubon's life insurance operations, would have a negative impact on its Individual rating.
Contacts: Joyce Huang, Jonathan Lee, Taipei, +886 2 8175 7600.
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: Nicole Batchelor, Singapore, Tel: +65 6796 7214,
Email:
nicole.batchelor@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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. The issuer did not participate in the rating process other than through the medium of its public disclosure.
