Bangkok--22 Dec--Asian Banker
Taipei / Hong Kong, December 21st 2011 - Fitch Ratings has downgraded Citibank Taiwan Limited's (CTL) Long- and Short-term Issuer Default Ratings (IDRs) to 'A' from 'A+' and to F1' from 'F1+' respectively. The ratings have been removed from Rating Watch Negative. The Rating Outlook is Stable. A full rating breakdown is provided below.
The rating actions follow a similar action on the IDRs of its ultimate parent, Citigroup Inc. (Citi) on 15 December 2011 (see 'Fitch Downgrades Citigroup's Support Driven Ratings' for further details). The Outlook is in line with the parent's. The agency notes that any rating action on its parent could trigger a similar rating action on CTL.
The IDRs of CTL are driven by Fitch's belief of a very high probability of support from its parent, given the former's strategic importance in Citi's consolidated group and their closely linked risk profiles. CTL continues to be seen by its parent as one of the group's core universal banking franchises, due to the subsidiary's strong earnings and key role in group-wide liquidity placement. Taiwan is also identified by its parent as one of the few key markets with high growth potential.
CTL demonstrates improved profitability, strong capitalisation and prudent risk management after the merger of Bank of Overseas Chinese (BOOC) and Citibank Taiwan Branch in 2009. For the first 10 months of 2011, CTL achieved a pre-tax return on equity of 19.85% (annualised) versus an industry average of 10.17%. Downside risk to asset quality should be limited given its strict credit discipline and stringent write-off/provisioning policies. CTL continues to be one of the best-capitalized financial institutions in Taiwan, with a Tier 1 capital ratio of 12.37% as of end- October 2011.
CTL was established in 2007 by Citi as a locally-incorporated subsidiary bank to acquire BOOC, a small domestic bank, and to merge with the long-established and larger Citibank Taiwan Branch in August 2009. CTL commanded a market share of 2.1% in deposits at end-H111 and operates 65 branches.
CTL's ratings:
Long-Term Foreign Currency IDR downgraded to 'A' from 'A+'; Removed from Rating Watch Negative; assigned Stable Outlook
Short-Term Foreign Currency IDR downgraded to 'F1' from 'F1+'; Removed from Rating Watch Negative
National Long-term Rating downgraded to 'AA+(twn)' from 'AAA(twn)'; Removed from Rating Watch Negative; assigned Stable Outlook
National Short-term rating affirmed at 'F1+(twn)'; Removed from Rating Watch Negative
Support Rating affirmed at '1'; Removed from Rating Watch Negative
--www.theasianbanker.com (December 21 2011)--