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

(The following was released by the rating agency)

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

The ratings reflect the bank's limited business scope and modest profitability, as well as its sound liquidity and stable retail franchise. The Stable Outlook underlines its adequate capitalisation after two recent capital injections in as many years was partially offset by higher than peer average loan growth.

Continuing above-trend loan growth resulting in capitalisation diminishing further or signs of asset quality deterioration may put the bank's ratings under pressure. Asset quality weakening may result from a sharp correction in the domestic 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-H112 from 9.84% at end-2011 due to growth in lending to the construction and property sectors and in northern Taiwan. This is, however, still up from 8.19% in end-2010. Non-performing loan (NPL) ratio has been on a rising trend during H112, but remains low at 0.38% with reasonable loan loss coverage. TCB has a sound liquidity profile supported by a stable retail deposit base in its home market. It has approximately 5.95% of Taiwan's total retail deposits.

The convertible bond rating is equivalent to TCB's National Long-Term rating, and reflects its status as senior, unsecured obligations of the bank. The subordinated bond rating is one notch below the bank's National Long-Term rating, reflecting its subordinated status and the absence of any going-concern loss-absorption mechanism (such as coupon deferral under specified conditions). Any rating action on TCB is likely to trigger a similar move in its debt ratings.

TCB is a privately owned regional bank in Taiwan, with a deposit market share of 1.3% at end-H112. China Man-Made Fiber Corp (CMFC) is its largest shareholder and CMFC's subsidiaries have 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)'; Outlook Stable

National Short-Term Rating affirmed at 'F2(twn)' Viability Rating 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)'