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Fitch Ratings-Taipei/Hong Kong-11 December 2009: Fitch Ratings has today affirmed the ratings of Taiwan International Securities Corporation (TISC). A list of the rating actions is included at the end of this release.
TISC's ratings mainly reflect its volatile earnings performance due to a lack in the economies of scale in the important brokerage market. The ratings also take into account TISC's adequate capitalisation and improved liquidity, since there was a notable decline in its less liquid investments in January-September 2009. TISC's ratings are not based on state support or support from its largest institutional shareholder, China Development Financial Holding Corporation (CDIBH), which does not have management control of the company.
TISC continues to be managed independently from CDIBH, despite the latter's dominant ownership of 48%. This is due to CDIBH's inability to acquire full ownership and the resistance from TISC's founding Chang family, which holds management control despite its disproportionately smaller share ownership in TISC.
TISC returned to a net profit of TWD0.4bn in January-September 2009 after a net loss of TWD1.4bn in 2008 as brokerage revenues and trading profits benefited from the strong recovery of Taiwan's stock market since March 2009. Given the greater uncertainty in local capital markets, TISC materially reduced its investments in bonds and stocks to 48% and 3% of net worth at end-Q309 respectively (from 85% and 11% at end-2008). Thanks to the reduced market risk exposures, TISC's capital adequacy ratio stood at a high 480% at end-Q309, well above the 150% regulatory minimum. Based on audited financials, TISC has an adequate liquidity position with the ratio of long-term funding to less-liquid assets at 167% at end-Q309 (up from 79% at end-2008), mainly due to a decline in its holdings of less liquid re-sell agreements backed by inverse floating-rate bonds.
TISC is one of the smaller fully licensed securities firms in Taiwan with 2.3% of the local stock brokerage.
The following ratings have been affirmed:
Long-term foreign currency Issuer Default Rating (IDR) affirmed at 'BB'; Outlook Stable
Short-term foreign currency IDR affirmed at 'B';
National Long-term rating affirmed at 'BBB+(twn)'; Outlook Stable
National Short-term rating affirmed at 'F3(twn)';
Individual rating affirmed at 'D';
Support rating affirmed at '5'; and
Support rating floor affirmed at 'NF'.
Contacts: Yuchi Fan, Sophia Chen, Jonathan Lee, Taipei, +886 2 8175 7600.
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.
Media Relations: Karen Cho, Hong Kong, Tel: +852 2263 9935,
Email:
karen.cho@fitchratings.com.
Additional information is available at www.fitchratings.com.
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