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Fitch Ratings-Taipei/Hong Kong-05 November 2009: Fitch Ratings has today revised the rating Outlook on Taiwan's Grand Bills Finance Corporation (GBF) to Stable from Negative and affirmed all its ratings. A list of the ratings is included at the end of this release.
These rating actions reflect GBF's high capital adequacy, as well as its improved liquidity and profitability after a large write-down of low quality asset-backed commercial paper (ABCP) in 2008. GBF's limited business scope and Taiwan's likely interest rate volatility are factors that constrain its ratings.
In response to heightened risks in liquidity and asset quality in the wake of global financial crisis, GBF reduced its credit exposures and obtained TWD3.7bn of committed liquidity facilities from its shareholder Chinatrust Commercial Bank (IDR: 'A'/Stable). The reduction of its CP guarantees and the large write-down of its low quality ABCP investments led to a notable decline in GBF's total credit exposures, to 6.5x net worth at end-H109 from 12.2x at end-2007. As a result, GBF's long-term funding, which included the bank shareholder's committed liquidity facilities, comfortably covers its less liquid assets by 116% at end-H109 (end-2007: 66%). Meanwhile, GBF's capital adequacy ratio improved significantly to 22% at end-H109 from 14% at end-2007, and is well above the 8% regulatory minimum.
In H109, GBF's profitability improved to an annualised ROA of 0.7% (2008: 0.3%), driven by expanded interest margins and reduced credit impairments. The credit quality of GBF's CP guarantees remains good. GBF has not reported new problem exposures from guarantees since 2003. GBF is susceptible to an abrupt spike in long-term interest rates, which could cause mark-to-market losses on its bond investments. However, Fitch believes such risks to be manageable given its bond portfolio's relative short duration.
GBF is a mid-sized Taiwan bills finance firm. Its largest shareholders are President Group and Chinatrust Commercial Bank, with 40% and 21% stakes, respectively.
The following ratings have been affirmed, and the Outlooks on the Long-term foreign currency Issuer Default Rating (IDR) and National Long-term rating have been revised to Stable:
- Long-term foreign currency IDR at 'BBB-'/Outlook Stable;
- Short-term foreign currency IDR at 'F3';
- National Long-term rating at 'A(twn)'/Outlook Stable;
- National Short-term rating at 'F1(twn)';
- Individual at 'C/D';
- Support at '5';
- Support Rating Floor at 'NF'; and
- Senior unsecured debt rating at 'A(twn)'.
Contacts: Yuchi Fan, 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: Karen Cho, Hong Kong, Tel: +852 2263 9935,
Email:
karen.cho@fitchratings.com.
Additional information is available at www.fitchratings.com.
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