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Fitch Ratings-Taipei/Hongkong/Singapore-22 July 2009: Fitch Ratings has today affirmed Bank of Taipei's (BOTP, formerly First Capital Commercial Bank) National Long-term rating at 'A-(twn)', National Short-term rating at 'F1(twn)', Individual at 'C/D' and Support at '5'. The Outlook is Stable.
BOTP's ratings reflect its reasonable capitalisation and satisfactory asset quality, as well as the weakness of its small franchise and modest profit level. BOTP continued to implement organisational changes and enhance its product offerings in 2008-2009 in a bid to make its business model more commercially oriented. Brand building, including adoption of a new name and a new corporate identity system, were key focus areas in 2008-2009. The bank has expanded its geographic coverage, which still focuses on the greater Taipei area, by re-allocating its branches for effective coverage.
The bank's loan portfolio grew moderately by 1% during January-April 2009 (4M09), following a 4.8% growth in 2008. The growth in 2008 was driven by secured loans to individuals and micro and small business customers, as well as unsecured loans to state-owned enterprises. 86% of total loans were loans to consumers at end-2008. To reduce risk exposure, BOTP cut its relatively small riskier unsecured personal loans in 4M09. At end-April 2009, its secured loans represented the majority of total loans. Fitch notes that the bank's asset quality has weakened, as its NPL ratio increased slightly to 1.3% at end-April (end-2008: 1.0%) and may pressure its already low profitability. Nevertheless, its problem exposures are fully covered with loan loss reserves.
The bank had a modest pre-tax profit in H109 as compressed interest margin notably weakened its net interest income - its largest income source. Its fee-based income, albeit still small relative to total revenue, grew significantly in H109 thanks to the contribution from new products. BOTP's provision expenses increased slightly on a yoy basis in H109 amid the weak economic conditions. Fitch expects the narrower interest margin will continue to weigh on its profit throughout 2009.
BOTP has a reasonable capital level with a Tier 1 ratio of 11.8% at end-2008. The agency expects its Tier 1 ratio to stay at around 11% in 2009 in view of slow asset growth. The bank has a good liquidity profile benefiting from its strong ties with local communities that has contributed it a stable source of retail funding.
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.
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