Chinese Bank and EnTie downgraded

Taiwan Ratings Corp (中華信評), a local arm of Standard and Poor's Ratings Services, revised down its ratings outlook on two small local banks yesterday, citing the deteriorating financials of the lenders under the threat of rising consumer bad debts.

The outlook on the Chinese Bank (中華銀行) was downgraded to "negative" from "stable" to reflect expectations that the bank's overall financial profile, particularly its capitalization, was likely to come under increasing pressure on rising unsecured consumer loan delinquencies, Taiwan Ratings said in its statement released yesterday.

The lender's asset quality was below average and had deteriorated recently due to rising card delinquencies since the middle of last year. Its bad loan ratio of cash and credit card loans, which together represented about 30 percent of its total lending, increased sharply to about 35 percent in April from 16 percent last September, the ratings service provider said.

Taiwan Ratings also downgraded its outlook on EnTie Commercial Bank (安泰銀行) to "negative" from "stable," as its risky balance transfer business has contributed to its financial deterioration.

Despite EnTie's suspension of the high-risk business in late 2004 and efforts to clean up, the bad loan ratio from this line, which made up 15 percent of its total lending, surged to 38 percent, or about NT$21 billion, in April, from 10.3 percent in July last year, it said.