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Fitch Ratings-Taipei/Hongkong/Singapore-13 August 2009: Fitch Ratings has today affirmed ratings of Standard Chartered Bank (Taiwan) Limited's (SCBTL) Long-term Issuer Default Rating (IDR) at 'A', Short-term IDR at 'F1', National Long-term rating at 'AA+(twn)', National Short-term rating at 'F1+(twn)', Individual rating at 'C/D' and Support rating at '1'. The Outlook is Stable.
SCBTL's Long-term ratings are underpinned by the strength of its parent, Standard Chartered Bank (SCB, 'A+'/Outlook Stable), including its strong franchise in the Asia-Pacific region and sound capitalisation. SCBTL's Individual rating reflects its reasonable capitalisation and asset quality, as well as its weakness in its relatively small franchise and modest profitability.
SCBTL's ultimate parent Standard Chartered Plc (SC) continues to view Taiwan as one of the key markets in North East Asia. SC has made significant investments in SCBTL (including new capital injections to shore up its balance sheet) following its acquisition of Hsinchu International Bank (HIB) in late 2006.
In 2008, SCBTL further expanded its franchise by taking over American Express Bank's (AEB) Taiwanese operations, and acquiring the good assets of the failed Asia Trust and Investment Corporation. In total, SCBTL acquired TWD13bn in assets (2% of end-2008 assets) and nine branches from these two acquisitions.
SCBTL's continued efforts to restructure following these acquisitions, and the resulting high operating expenses and provisioning costs have weighed on profitability. The bank reported a small profit of TWD18m in 2008 and TWD108m in Q109. Nonetheless, the clean-up of bad assets led to a reasonably low NPL ratio of 2.7%, and loan loss reserves covered 41% of problem credits at end-Q109. Although the loan loss coverage appears low compared with the sector's 69%, SCBTL advised that the problem loans were mainly secured and were expected to have a high loss recovery rate.
SCBTL has a good liquidity profile. Benefiting from a flight to quality in periods of stress, as seen in Q408, its deposits grew by 35% in 2008, leading to a low loan-to-deposit ratio of 61% at end-2008. It also maintains reasonable capitalisation with Tier 1 and total capital adequacy ratios of 5.3% and 10.1% at end-2008, respectively.
SCB opened its first branch office in Taipei in 1985. In July 2007, the bank completed its integration with HIB, and now operates in Taiwan under the name SCBTL. It had 94 branches and 2.2% of deposits at end-Q109.
Contacts: Joyce Huang, Sophia Chen, 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: Lisa Lim, Singapore, Tel: +65 6796 7214,
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