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Fitch Ratings-Taipei/Singapore-03 September 2009: Fitch Ratings has today assigned a National Long-term rating of 'A+(twn)' to Taiwan-based Chang Hwa Bank's (CHB) subordinated bonds issuance, amounting to TWD5bn. The bank's subordinated bonds carry a fixed coupon rate of 2.3% and will mature on 15 September 2016. The issue is rated one notch below CHB's National Long-term rating of 'AA-(twn)' for its senior debt, and is in compliance with Fitch's rating criteria on subordinated bond instruments of financial institutions.
CHB's Long-term Issuer Default Rating (IDR) of 'BBB+' and National Long-term rating of 'AA-(twn)' with Stable Outlooks are largely underpinned by the high possibility that the government will support the bank, given its significant market position and long legacy of state ownership, if needed.
The bank's Individual rating of 'C/D' primarily reflects its adequate capitalisation, strong liquidity profile and reasonable asset quality. The bank reported a decline of annualised ROE to 1.3% in H109 (2008: 6.0%) due mainly to a slowdown in loan growth and compressed net interest margins. Additionally, a one-off reversal of tax credits caused by the reduced corporate income tax rate effective from May 2009 also weighed on CHB's bottom-line profits.
CHB has maintained its asset quality at a reasonably good level. The bank's NPLs stood at 1.7% of gross loans, which were properly provided for with reserves, while CHB's loan loss reserves-to-NPLs ratio was 75.2% at the end of June 2009. The bank is also adequately, but not strongly, capitalised with Tier 1 and capital adequacy ratios of 7.1% and 10.1%, respectively, at end-H109.
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.
Contacts: Sophia Chen, Stephanie Liu, Jonathan Lee, Taipei, +886 2 8175 7600.
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Email:
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