Fitch Affirms Taiwan's SinoPac Financial Group at 'BBB'; Outlook Stable

SINOPAC FINANCIAL HOLDINGS

21/09/2016 07:51

(The following statement was released by the rating agency)

TAIPEI, September 21 (Fitch) Fitch Ratings has affirmed the Issuer Default 
Ratings (IDRs) on Taiwan-based Bank SinoPac (BSP) and its parent SinoPac 
Financial Holdings Company Limited (SPH) at 'BBB', both with Stable Outlook. A 
full list of rating actions is provided at the end of this commentary.

KEY RATING DRIVERS 

IDRS, NATIONAL RATINGS AND VIABILITY RATINGS (VR)

The affirmation of BSP's IDR and VR and the Stable Outlook reflects its stable 
credit profile, which is underpinned by well-managed asset quality and healthy 
capitalisation. The management has delivered consistent performance in earnings 
and asset quality, while the ratings also consider the bank's greater variation 
in operational risk control compared with peers in recent years.

SPH's IDR and VR are equalised with those of its principal banking subsidiary, 
BSP. Fitch views SPH and BSP as a consolidated entity while SPH maintains 
moderate leverage at the holding company level. 

BSP has been more active than its local peers in pursuing opportunities in 
China, including forming a strategic alliance with ICBC (China) and 
incorporating a subsidiary locally in Nanjing. Meaningful growth in China could 
alter the bank's risk profile, although this is less likely in the medium term 
given the economic slowdown in China. BSP's China exposure is higher than that 
of peers, although exposure to China has reduced significantly due to weakened 
demand, based on Fitch's assessment.   

Credit standards appear consistent and conservative. Most loans are for housing 
or to large corporate with lower risk. The bank has incurred minimal new 
impairments since 2014. Impaired loans are significantly lower at 0.7% of total 
loans than the sector average of 1.1%, and are well-covered by its loan-loss 
reserve.

The bank is well-capitalised with Fitch Core Capital ratio at 12% at end-1H16, 
thanks to full earnings retention in 2012-2015 and modest asset growth. Fitch 
expects the bank to maintain a healthy capital position in the medium term based 
on assumptions of moderate balance-sheet growth, and stable asset quality and 
credit cost.

SUPPORT RATING AND SUPPORT RATING FLOOR 

BSP's Support Rating of '3' and Support Rating Floor of 'BB+' reflect its 
moderate systemic importance and a moderate probability of state support, if 
needed.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS AND VIABILITY RATINGS

A rating upgrade may occur if BSP's earnings prove to be sustainably robust 
without materially raising its risk appetite. A weakened risk profile and 
inadequate capitalisation arising from aggressive growth in China may result in 
a negative rating action. Any rating action on BSP could trigger a similar move 
on SPH's ratings.

SUPPORT RATING AND SUPPORT RATING FLOOR

BSP's Support Rating and Support Rating Floor are sensitive to any change in 
assumptions around the propensity or ability of the Taiwan government to provide 
timely support to the bank. An upgrade of Taiwan's sovereign rating 
(A+/Positive) will not affect the Support Rating and Support Rating Floor due to 
BSP's modest systemic importance

A Credit Update on SPH and BSP will be available shortly at 
www.fitchratings.com.

The rating actions are as follows: 

SinoPac Financial Holdings:

Long-Term IDR affirmed at 'BBB'; Outlook Stable

Short-Term IDR affirmed at 'F2'

National Long-Term Rating affirmed at 'A+(twn)'; Outlook Stable

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

Viability Rating: affirmed at 'bbb'

Bank SinoPac:

Long-Term IDR affirmed at 'BBB'; Outlook Stable

Short-Term IDR affirmed at 'F2'

National Long-Term Rating affirmed at 'A+(twn)'; Outlook Stable

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

Viability Rating affirmed at 'bbb'

Support Rating affirmed at '3'

Support Rating Floor affirmed at 'BB+'

Contact: 

Primary Analyst

Shirley Hsu 

Associate Director

+886 2 8175 7606

Fitch Ratings Limited, Taiwan Branch

Suite 1306, 13F, Tun Hwa N. Rd., Taipei 

Secondary Analyst 

Cherry Huang, CFA

Director

+886 2 8175 7603

Committee Chairperson

Parson Singha

Senior Director

+66 2108 0151

Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: 
wailun.wan@fitchratings.com.

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.

Additional information is available on www.fitchratings.com

Applicable Criteria 

Global Bank Rating Criteria (pub. 15 Jul 2016)

https://www.fitchratings.com/site/re/884135

National Scale Ratings Criteria (pub. 30 Oct 2013)

https://www.fitchratings.com/site/re/720082

Additional Disclosures 

Dodd-Frank Rating Information Disclosure Form 

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr 
_id=1011966

Solicitation Status 

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011966

Endorsement Policy 

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det 
ail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: 
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING 
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S 
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND 
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF 
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE 
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF 
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS 
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED 
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH 
WEBSITE