Thu, Oct 05, 2006 - Page 11 News List

Chinatrust Financial impresses S&P

By Amber Chung  /  STAFF REPORTER

Standard & Poor's Ratings Services (S&P) yesterday affirmed its ratings for Chinatrust Financial Holding Co (中信金控), citing the company's competitiveness and asset quality amid fallout from a consumer bad-debt storm.

S&P affirmed BBB long-term and A-3 short-term counterparty credit ratings for Chinatrust Financial, the nation's largest credit card issuer, with a positive outlook in that the group's underlying performance was likely to continue improving.

"The ratings for Chinatrust Financial reflect its competitive position in Taiwan's banking market, good underlying profitability and above-average asset quality," credit analyst Chun Huang (黃俊榮) said in the statement released yesterday.

The financial holding firm is one of the most competitive banking groups in Taiwan. With a highly professional management team, the group is likely to sustain its lead over its domestic peers, Huang said.

Chinatrust Financial's ratings may be raised if its banking arm can further improve its competitiveness and elevate and sustain its earnings, according to S&P.

However, the group's credit strength may come under pressure if credit costs associated with consumer products significantly exceed expectations or aggressive expansion significantly dilutes the group's resources, S&P warned.

In March, Fitch Ratings revised its outlook rating for Chinatrust Financial downward from "stable" to "negative" amid concerns over Taiwan's banking system caused by aggressive growth in unsecured consumer loans and a subsequent deterioration in the quality of the loans.

Meanwhile, Moody's Investors Services announced yesterday that it was revising its outlook for SinoPac Holdings (永豐金控) and Bank SinoPac (建華銀行) to "stable" from "developing."

The revision was made to reflect SinoPac Holdings' gains in scale, market share and possible synergies in the wake of a merger between Bank SinoPac and International Bank of Taipei (IBT, 台北國際商銀), according to the ratings agency.

The merger, which is scheduled to take effect on Nov. 13, will make Bank SinoPac the nation's 12th-largest lender by nearly doubling its size to NT$1 trillion (US$30 billion) in assets, Moody's said.

The bank's loan/deposit market share would be increased to nearly 4 percent from around 2 percent, and the number of branches would rise dramatically to 129 from 45, it said.

The benefits of scale and the synergies from the merger might eventually result in upward pressure on ratings, but would depend on the speed and effectiveness of the integration of the two banks, the ratings firm added.

IBT's branches are mainly in northern Taiwan, where more affluent customers are located, which offers opportunities to develop consumer banking and wealth management business, Moody's said.

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