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RPT-Fitch Affirms Standard Chartered Bank (Taiwan) at 'AA-'
October 23, 2013 / 10:05 AM / in 4 years

RPT-Fitch Affirms Standard Chartered Bank (Taiwan) at 'AA-'

Oct 23 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Standard Chartered Bank (Taiwan) Limited’s (SCBTL) Long-Term Issuer Default Rating (IDR) at ‘AA-’ and its Viability Rating (VR) at ‘bbb’. The Outlook is Stable. A full list of rating actions is provided below.

KEY RATING DRIVERS - IDR and VR

SCBTL’s IDR and Outlook remain aligned with those of its parent and sole owner Standard Chartered Bank (SCB; ‘AA-'/Stable), as Fitch views SCBTL as a core subsidiary within the group’s international network that plays a role in its greater China strategy. This is underpinned by their aligned risk management, a shared brand name and global network.

Affirmation of SCBTL’s VR reflects its stable balance sheet strength, reasonably managed asset quality, as well as modest earnings performance relative to similarly rated peers. The latter understates SCBTL’s strategic importance in the group as material earnings generated with Taiwanese clients outside of Taiwan are reported elsewhere in the group. The VR also factors in the ordinary support extended by SCB, including the previously mentioned parent-subsidiary integration.

RATING SENSITIVITIES - IDR and VR

Any rating action on SCB could trigger a similar rating action on SCBTL’s IDR. Meanwhile, SCBTL’s VR may be upgraded if the bank demonstrates an ability to contain asset quality deterioration during a cyclical downturn and to greatly enhance internal capital generation on a sustained basis. The VR may be downgraded if its mortgage portfolio, which accounts for over 50% of its loan book, comes under pressure from an unexpected and sharp correction of the Taiwan property market. A weakening risk profile arising from growth in exposures to China, may also lead to a downgrade of its VR.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

The Support Rating (SR) of ‘1’ on SCBTL is based on Fitch’s continuing belief of an extremely high probability of support from SCB, if needed. The SR is sensitive to any change in assumptions around the propensity or ability of SCB to provide timely support to SCBTL. This would most likely be manifested in a change to SCB’s ratings.

RATING DRIVERS AND SENSITIVITIES - SENIOR DEBT AND SUBORDINATED DEBT

SCBTL’s senior unsecured bonds are rated at the same level as its National Long-Term Rating, as they constitute direct, unconditional, unsecured and unsubordinated obligations of the bank. Its subordinated bonds are rated one notch below SCBTL’s National Long-Term Rating, to reflect their subordinated status and the absence of going-concern loss-absorption features. These notching practices are in accordance with Fitch’s criteria on rating senior unsecured bond instruments and bank regulatory capital of financial institutions. Any rating action on SCBTL’s Long-Term Ratings could trigger a similar move on its debt ratings.

SCB acquired HIB in 2006 and renamed it SCBTL. SCBTL integrated SCB Taiwan Branch in 2007 and acquired American Express Bank Taiwan and Asia Trust in 2008. SCBTL has total assets of TWD712.8bn (USD23.8bn, nearly 4% of SCB group’s total assets) and had a deposit market share of 1.7% in Taiwan at end-June-2013. A Credit Update for SCBTL will be available on www.fitchratings.com shortly.

The rating actions are as follows:

- Long-Term IDR affirmed at ‘AA-'; Stable Outlook

- Short-Term IDR affirmed at ‘F1+’

- National Long-Term Rating affirmed at ‘AAA(twn)'; Stable Outlook

- National Short-Term Rating affirmed at ‘F1+(twn)’

- Viability Rating affirmed at ‘bbb’

- Support Rating affirmed at ‘1’

- Senior unsecured debt National Long-Term Rating affirmed at ‘AAA(twn)’

- Subordinated debt National Long-Term Rating affirmed at ‘AA+(twn)'

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