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Fitch Ratings-Taipei/Hong Kong-27 January 2010: Fitch Ratings has today affirmed Taiwan's Oriental Securities Corporation's (OSC) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB-', and its Short-term foreign currency IDR at 'F3'. The Outlook is Stable. A list of all rating actions is included at the end of this release.
OSC's ratings are based on its satisfactory capitalisation, ample liquidity, and good asset quality, which mitigate its volatile profitability. Fitch notes that OSC had total equity exposure to its parent, Far Eastern Group (FEG), of about 29% of its net worth at end-Q309. While the agency notes that this concentration risk is of some concern, OSC's satisfactory capital and FEG's reasonable leverage and profitability provide some comfort.
OSC returned to net profit with a preliminary return on equity of 21% in 2009 (2008: -26%), owing primarily to proprietary trading gains amid a strong recovery in Taiwan's equity market. OSC's volatile results reflect the company's sizable exposure to stock holdings. Offsetting this, the company continues to maintain low financial leverage and satisfactory capitalisation. OSC's equity/asset and capital adequacy ratios remained high at 74% and 546% respectively, at end-2009, compared with peer average of 57% and 510%, respectively.
OSC has good asset quality and experienced no credit losses from counterparty or customer exposures during 2008-2009. OSC maintains a good liquidity profile, with a current ratio of 374% at end-2009, markedly higher than the industry average of 161%.
OSC is the 13th-largest fully-licensed securities firm in Taiwan in terms of equity. Following a management reshuffle in February 2009, OSC continues to act as a provider of trading, brokerage and stock registration services to its 99%-shareholder, FEG, a large and well-diversified conglomerate.
OSC's ratings have been affirmed as follows:
- Long-term foreign currency IDR affirmed at 'BBB-'; Outlook Stable
- Short-term foreign currency IDR affirmed at 'F3';
- National Long-term rating at 'A(twn)'; Outlook Stable
- National Short-term rating at 'F1(twn)';
- Individual rating at 'C/D'; and
- Support rating at '5'.
Applicable criteria available on Fitch's website at www.fitchratings.com: "Global Financial Institutions Rating Criteria", dated 29 December 2009 and "Rating Criteria for Securities Firms", dated 30 December 2009.
Contacts: Yuchi Fan, Cherry Huang, 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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