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Fitch Ratings-Taipei/Hongkong/Singapore-09 June 2009: Fitch Ratings has today revised the Outlook of Taiwan-based Bank SinoPac (BSP)'s ratings to Negative from Stable, downgraded its Individual rating to 'C' from 'B/C', and affirmed its other ratings. Accordingly, the agency revised the Outlook of its parent SinoPac Financial Holdings (SPH)'s ratings to Negative from Stable, downgraded its Individual rating to 'C' from 'B/C' and affirmed its other ratings. At the same time, the agency has affirmed all the ratings of SinoPac Securities (SPS), the group's securities subsidiary.
In addition to its PEM group exposure, the rating action on BSP principally reflects the bank' notably weakened internal capital generation due to sharply compressed interest margins on its mortgage-concentrated loan portfolio. Also, the consecutive losses in 2007-2008 caused by its write-downs of investments on structured investment vehicles and PEM group exposure points to weaknesses in the bank's internal control and risk management. As of 31 March 2009, BSP's Tier I CAR stood at 9.38%. A full writedown of the PEM group exposure would reduce it by around 70 basis points. The Negative Outlook indicates that Fitch may downgrade BSP's IDRs if the bank's core profitability, capitalisation, or asset quality deteriorates.
The rating action on SPH reflects the weakening of its principal subsidiary, BSP, as discussed above. That said, while losses at BSP in 2009, should they come to pass, would negatively impact SPH's liquidity level, on a stand-alone basis, SPH is lowly leveraged with a double leverage ratio of just 105% at end-March 2009. Meanwhile, SPH's sum-of-the-parts capital ratio remained satisfactory at 130% at end-March 2009, well above the regulatory minimum 100%, thanks to excess capital in SPS.
The ratings of SPS are underpinned by its stand-alone financial strength. The company's capitalisation increased to 473% at end-March 2009, from 369% at end-2007, as SPS scaled back its risk exposures throughout 2008 to cope with the economic downturn. It has a rather liquid balance sheet, with a current asset to current liabilities ratio of 200% at end-March 2009. Benefiting from improved equity market, SPS reported a net profit of TWD164m, versus a full year loss of TWD828m in 2008.
The new ratings of BSP and SPH are as follows:
BSP:
- Long-term foreign currency Issuer Default Rating (IDR) at 'BBB+',
- Short-term foreign currency IDR at 'F2',
- National Long-term rating at 'AA-(twn)' ,
- National Short-term rating at 'F1+(twn)',
- Individual at 'C',
- Support at '3',
- Support Rating Floor at 'BB+', and
- Negative Outlook.
SPH:
- Long-term foreign currency IDR at 'BBB',
- Short-term foreign currency IDR at 'F3',
- National Long-term rating at 'A+(twn)',
- National Short-term rating at 'F1(twn)',
- Individual at 'C',
- Support at '5', and
- Negative Outlook.
SPS:
- Long-term foreign currency IDR at 'BBB',
- Short-term foreign currency IDR at 'F3',
- National Long-term rating at 'A+(twn)',
- National Short-term rating at 'F1(twn)',
- Individual at 'C',
- Support at '2', and
- The Outlook is Stable.
Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(twn)' for National ratings in Taiwan. Specific letter grades are not therefore internationally comparable.
Contacts: Renee Tsai, Sophia Chen, Jonathan Lee, Taipei, +886 2 8175 7600.
Media Relations: Lisa Lim, Singapore, Tel: +65 6796 7214,
Email:
lisa.lim@fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
