Taiwan Ratings Corp (中華信評), a local arm of Standard & Poor’s Ratings Service, yesterday revised its outlook on Standard Chartered Bank (Taiwan) Ltd (SCB Taiwan, 渣打國際商銀) to “negative” from “stable” after the outlook assigned to its parent banking group was downgraded to “negative” last week.
“SCB Taiwan is a strategically important entity of the group and benefits from its parent’s support. The company’s credit risk has therefore moved in tandem with the credit trend of the parent group,” Taiwan Ratings said in a report.
S&P’s outlook revision on parent SCB last week “reflected its view that SCB’s impairment charges may rise very sharply in the short to medium term, given the synchronized economic downturn across many of the key countries in Asia and the Middle East, within which SCB operates,” the report said.
The ratings agency expects the economic slowdown to affect the wholesale bank’s credit quality.
Group loan impairments could also surge this year, it said, while predicting a base case of less than the 74 percent rise it marked last year.
The negative outlook ratings on SCB Taiwan could be lowered if the parent group’s credit risk deteriorates further or the Taiwanese subsidiary’s capitalization deteriorates because of aggressive expansion or an unexpected increase in credit costs, the report said.
Taiwan Ratings could revise SCB’s outlook back to “stable” if the economic outlook in Taiwan improves significantly and its parent banking group’s earnings remain robust, the report said.