Thanks to its partnership with Shinsei Bank of Japan to improve financial conditions, ratings on Jih Sun Financial Holding Co (
Fitch Ratings revised Jih Sun Financial's Long-term Issuer Default Rating (IDR) last Friday to "BB+", Short-term to "B," National Long-term to "A-(twn)," and National Short-term to "F2(twn)" with stable outlooks.
"The rating action was in response to the improved financial profile of the group after it received large capital injections totaling NT$12 billion [US$361 million] mainly from Shinsei in July to recapitalize its bad debt-affected banking subsidiary Jih Sun International Bank (日盛銀行)," Fitch said.
The recapitalization markedly raised the bank's almost depleted capital base to a healthy level with total capital adequacy ratio and Tier-1 ratio at 10.2 percent and 7.2 percent, respectively, the ratings agency said.
Jih Sun Financial's sum-of-parts capital ratio currently stands at 128 percent, which exceeds the statutory requirement of 100 percent as well, it added.
In May, Shinsei bought a 31.8 percent stake in Jih Sun Financial and was entitled to appoint the financial group's chief risk management official as well as credit control officials at its banking unit.
Fitch views Shinsei's involvement in the Jih Sun Group's management and strategic formation as rating positive, the ratings firm said.
The strategic alliance could have a positive impact on the profitability of both groups as Shinsei has the opportunity to leverage its expertise in non-performing loan disposal at Jih Sun International, Fitch said.
Despite the financial holding firm's efforts to revitalize its commercial banking franchise by developing fee-based banking services, trimming high risk credits and rationalizing operating cost, the reform will take some years to benefit the bottom line given the competitive landscape of Taiwan's banking industry, Fitch said.
Jih Sun Financial closed up by its 7 percent limit to NT$7.74 in the GRETAI Securities Market yesterday.