Taiwan Ratings Corp (中華信評) yesterday downgraded private lender Ta Chong Bank's (大眾銀行) long-term outlook rating from positive to stable because of its slowing progress in the improvement of its financial profile, including profitability and capitalization.
The local arm of Standard & Poor's Ratings Services also affirmed its "twA-" long-term and "twA-2" short-term counterparty credit ratings on the bank, it said in a press release yesterday.
Increases in the bank's credit costs associated with its unsecured consumer lending business are partly responsible for the slowdown, it said.
The ratings for Ta Chong Bank, the nation's fourth-largest cash card issuer, reflect its balanced business profile and adequate capitalization. Moderating factors include its relatively small, albeit growing, market position, the report said.
The bank's earnings growth momentum is likely to slow down, though its pre-provision earnings profile should remain relatively diversified and adequate.
"Over the medium term, the bank may face challenges to raise profit margins under conditions of excessive market liquidity and competition," Taiwan Ratings said.
However, the rating agency expects the bank's growing treasury marketing unit, factoring and foreign exchange and wealth management to provide fee income expansion to support its pre-provision profits.
As a small to midsize commercial bank in Taiwan, Ta Chong Bank commanded a 1.6 percent market share of system-wide assets as of the end of last year, up from 1.4 percent a year earlier.
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