Fitch Ratings yesterday placed state-run Taiwan Cooperative Bank’s (TCB, 合作金庫銀行) viability rating on negative watch, but maintained its long-term credit rating at “A-,” with a stable outlook.
The international ratings agency attributed the negative watch to the lender’s weakened capital position and ability to withstand potential asset quality deterioration, given its large exposure to loss-making DRAM and flat-panel makers.
TCB, the banking arm of the recently established Taiwan Cooperative Financial Holding Co (合作金控), is the nation’s second-largest bank, with 300 branches. It commanded a market share of about 8.2 percent in terms of deposits in the third quarter of last year.
Fitch said TCB’s exposure to the cash-strapped firms could increase if the government requests an extension of support to the DRAM and flat panel sectors, a move that may lead to the ratings agency placing a negative watch on the lender’s credit profile.
To remove the negative watch on its viability rating, TCB needs to complete a planned rights issue later this year and be able to maintain capitalization equal to its future risk profile, amid the parent firm’s restructuring, Fitch said.
The bank’s strong loan growth last year and the group’s reorganization are expected to lower its Tier 1 capital ratio to about 6.4 percent at the end of this year, from 7.1 percent at the end of 2010, Fitch said.
TCB plans to raise NT$21 billion (US$700 million) in the first half and to use most of the money to shore up the banking unit’s capital.