Fitch Ratings yesterday revised downward its outlook on Taishin Financial Holding (台新金控) and all of its subsidiaries from “stable” to “negative” on the financial service provider’s declining profitability.
“The group’s pre-provision profitability has been in steady decline since 2006, and is expected to fall further in the second half of this year and 2009,” the rating agency said in a statement yesterday.
Meanwhile, the company’s high double leverage and subsidiary Taishin International Bank’s (台新銀行) inadequate reserves against unsecured consumer lending leaves it vulnerable to adverse developments in the local economy, the statement said.
A sizable equity injection will improve the group’s credit profile and prevent a further downgrade of its ratings, the statement said.
The bank has earmarked only NT$4.4 billion (US$136 million) in reserves for its NT$20 billion in non-performing unsecured credit-card loans, which are expected to only recover between US$0.30 and US$0.40 on the dollar.
As such, “the group will need to raise at least NT$10 billion in the next two years,” Jonathan Lee (李信佳), the rating agency’s senior director of financial institutions group, said by telephone yesterday.
Lee also expressed concerns over the group’s 152 percent ratio double leverage used by the parent holding company to give the bank access to debt-based capital. The ration is far higher than the normal level of 120 percent.
In a separate news, the Financial Supervisory Commission said that the government’s blanket guarantee on bank savings has effectively slowed the recent flows of bank savings from small banks with poor liquidity to state-run banks.
“The saving flows from smaller banks to state-run banks slowed by almost two-thirds on Oct. 7 from a day earlier,” commission Vice Chairwoman Lee Jih-chu (李紀珠) told a press conference yesterday.
She declined to provide exact figures.
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