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Fitch Ratings-Taipei/Hongkong/Singapore-22 July 2009: Fitch Ratings has today affirmed Taiwan Cooperative Bills Finance Corporation's (TCBFC) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-', Short-term foreign currency IDR at 'F3', National Long-term rating at 'A(twn)', National Short-term rating at 'F1(twn)', Individual rating at 'D', Support rating at '2' and Support Rating Floor at 'NF'. The Outlook is Stable.
TCBFC's IDRs are based on expected strong support from its parent, Taiwan Cooperative Bank (TCB, 'BBB+'/Stable). Its Individual Rating considers TCBFC's small franchise and less diversified revenue sources, but also takes into account its adequate capitalisation and liquid balance sheet. TCBFC's strategic intent is to expand its guarantee offerings by exploiting its parent's large comprehensive corporate customer base. TCBFC is in an advantageous position to exploit TCB's well-established credit database, which enables it to extend credits to a selective group of customers with proven track records. TCBFC is also cautiously managing its fixed-income investments, with government bonds as its prime holdings.
TCBFC's net profit improved in Q109 and 2008, thanks to expanded guarantees, improved market spread and large bad-debt recoveries after extraordinary provisioning in 2006. Fitch expects TCBFC to deliver a modest profit in 2009, supported by a widened gapping spread, better market pricing and steadily rising commercial paper issuance volume, although the associated credit risks could increase due to the weak economy. Fitch notes that TCBFC actively manages its liquidity, as it relies on bill and bond repurchase agreements for funding. The good underlying credit quality of TCBFC's repos and the reasonably diversified repo counterparties should help ease funding strains. TCBFC has a very strong capital position after the latest cash infusion in March 2009. Although its CAR will decline with business expansion, TCBFC intends to maintain a reasonable capital buffer.
TCBFC is the successor of Great Chinese Bills Finance Corporation (GCBFC). TCB became TCBFC's largest shareholder in late 2007, and held a 79.7% holding at end-Q109. TCB is the second-largest bank in Taiwan, with a 9.1% market share in deposits, second only to Bank of Taiwan's 10.8%.
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.
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