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Fitch Ratings-Taipei/Hong Kong/Singapore-09 September 2009: Fitch Ratings has today assigned ratings to Mega International Commercial Bank Company Limited (Mega ICBC), as follows:
Long-term Issuer Default Rating (IDR) 'A-', Short-term IDR 'F2', National Long-term rating 'AA(twn)', National Short-term rating 'F1+(twn)', Individual rating 'B/C', Support '2' and Support Rating Floor 'BBB+'. The Outlooks on the IDR and National Long-term ratings are Stable.
The ratings of Mega ICBC reflect its strong franchise, resilient profitability, and adequate asset quality and capitalisation. Its leading position in Taiwan's wholesale banking segment, particularly in foreign exchange and trade finance markets, helps sustain its profitability in the economic downturn.
Although the recession has compressed the bank's net interest margin, Mega ICBC's profitability remains resilient, with a net profit of TWD5.6bn in H109 (annualised ROE: 7.7%). The weak performance in 2008 was mainly due to a large one-off provision for impaired assets of US subprime-related, Lehman Brother and Iceland's banks. In light of the much reduced exposures following the sizeable write-down, Fitch considers that any further impairment would not have material impact on the bank's capital position.
Mega ICBC's NPL ratio remained low at 1.2% at end-H109 and loan loss reserves covered 87% of the problematic credits. Although the problem loans excluded the restructured debts of some financially weak corporations, the existing capital cushion largely mitigates Fitch's concerns over the potential credit risk. Mega ICBC is adequately capitalised, with a Tier 1 ratio of 9.3% at end-H109 and a total capital ratio of 11.4%. Liquidity remains strong, with its statutory liquidity ratio standing at 29% as of end-H109 - a level that is significantly higher than the regulatory requirement of 7%.
Mega ICBC is a wholly owned banking subsidiary of Mega Financial Holding (MFH) and had a 6% market share of deposits at the end of H109. The government is the largest shareholder of MFH, which holds around a 23% stake, and controls the board. In light of the bank's systemic importance and the state's controlling ownership, Fitch expects strong state support for Mega ICBC, if the need arises.
Contacts: Joyce Huang, Stephanie Liu, 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,
Email:
lisa.lim@fitchratings.com.
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