TEXT-Fitch Affirms Taichung Commercial Bank at 'BB+'/Stable

(The following was released by the rating agency)

TAIPEI/SINGAPORE, October 09 (Fitch) Fitch Ratings hasaffirmed Taiwan-based Taichung Commercial Bank's (TCB) ratings,including Long-Term Issuer Default Ratings (IDRs) at 'BB+' withStable Outlook. A full rating breakdown is detailed below

The ratings reflect the bank's limited business scope andmodest profitability, as well as its sound liquidity and stableretail franchise. The Stable Outlook underlines its adequatecapitalisation after two recent capital injections in as manyyears was partially offset by higher than peer average loangrowth.

Continuing above-trend loan growth resulting incapitalisation diminishing further or signs of asset qualitydeterioration may put the bank's ratings under pressure. Assetquality weakening may result from a sharp correction in thedomestic property market on which its lending is concentrated.Rating upside is limited by the aforementioned weaknesses.

TCB's Fitch Core Capital ratio fell to 9.33% at end-H112from 9.84% at end-2011 due to growth in lending to theconstruction and property sectors and in northern Taiwan. Thisis, however, still up from 8.19% in end-2010. Non-performingloan (NPL) ratio has been on a rising trend during H112, butremains low at 0.38% with reasonable loan loss coverage. TCB hasa sound liquidity profile supported by a stable retail depositbase in its home market. It has approximately 5.95% of Taiwan'stotal retail deposits.

The convertible bond rating is equivalent to TCB's NationalLong-Term rating, and reflects its status as senior, unsecuredobligations of the bank. The subordinated bond rating is onenotch below the bank's National Long-Term rating, reflecting itssubordinated status and the absence of any going-concernloss-absorption mechanism (such as coupon deferral underspecified conditions). Any rating action on TCB is likely totrigger a similar move in its debt ratings.

TCB is a privately owned regional bank in Taiwan, with adeposit market share of 1.3% at end-H112. China Man-Made FiberCorp (CMFC) is its largest shareholder and CMFC's subsidiarieshave nine out of 15 seats on the Board of Directors.

TCB: Long-Term IDR affirmed at 'BB+'; Outlook Stable Short-Term IDR affirmed at 'B'

National Long-Term Rating affirmed at 'A-(twn)'; OutlookStable

National Short-Term Rating affirmed at 'F2(twn)' ViabilityRating affirmed at 'bb+'

Support Rating affirmed at '5' Support Rating Floor affirmed at 'No Floor' Convertible bonds affirmed at 'A-(twn)' Subordinated bonds affirmed at 'BBB+(twn)'