Despite a reprimand from the regulator over its future business expansion, the corporate ratings and business outlook on Chinatrust Financial Holding Co (中信金控) and its core subsidiary Chinatrust Commercial Bank (中國信託銀行) is expected to remain unchanged for the moment, a rating agency said yesterday.
Taiwan Ratings Corp (
Taiwan Ratings maintained its twAA- and twA-1 long term and short term credit ratings on Chinatrust Financial with a stable outlook. The agency also left its twAA and twA-1 credit ratings unchanged on Chinatrust's banking unit under a stable outlook.
Taiwan Ratings is the local arm of Standard & Poor's Ratings Service.
The commission announced on Tuesday night that Chinatrust Financial, the nation's fourth-biggest financial services group by assets, would be banned from raising capital or setting up overseas outlets because it had misused funds when buying shares in bigger competitor Mega Financial Holding Co (兆豐金控).
Chinatrust's banking arm owns approximately 9 percent of Mega Financial, breaching rules that lenders in Taiwan are not allowed to own more than 5 percent of a listed company, the regulator said.
The commission said the suspension will remain effective until Chinatrust Financial finds a solution to reduce its concentration risk.
Chinatrust Financial has accumulated, directly or indirectly, more than 15 percent of the outstanding shares in Mega Financial since the beginning of the year, which is equivalent to slightly more than 30 percent of Chinatrust Financial's adjusted total equity at the end of December last year, according to Taiwan Ratings.
Despite significant exposure to Mega Financial, the credit profiles of Chinatrust Financial and its banking arm remain within the confines of their current ratings, given the adequate credit quality and good liquidity of the target, the rating agency said.
However, the ratings or outlook on either company could come under pressure if their credit profiles, business development plans or profitability, are negatively affected by the suspension or a sell-off of their Mega Financial shares at an unfavorable market rate, according to the statement.
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