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Moody's affirms ratings on Bank SinoPac, parent

Moody's Investor Service yesterday affirmed its ratings on Bank SinoPac (永豐銀行) and its parent company, SinoPac Financial Holdings Co (永豐金控), after the bank's latest disclosure of asset impairment in structured-investment vehicles (SIVs).

Given the bank's ample liquidity, strong capital levels and relatively sound assets, Moody's said the outlook on all ratings remained "stable."

But Moody's warned a possible rating downgrade could follow if the bank failed to improve its risk management framework.

SinoPac Financial said yesterday it would book a NT$1.528 billion (US$47.2 million) charge for the third quarter to reflect losses on its banking unit's US$350 million investments in SIVs, a company filing to the Taiwan Stock Exchange showed. On Monday night, the company estimated the losses at NT$1.397 billion for the third quarter.

Based on the 7.096 billion common shares issued, the writedowns were likely to dent the firm's third-quarter earnings by NT$0.215 per share.

"Bank SinoPac's development of a concentration of these and other structured products points to lapses in risk governance and management," Richard Lung, a Moody's vice president and senior analyst, said in a release yesterday.

The bank's exposure to structured credit investments is considered small relative to its equity base, but Moody's assumed the bank would post more losses on its SIV exposure.

Additional losses, which add to concern over the bank's credit fundamentals, could lead to a reassessment of SinoPac's financial strength, it added.
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