Bangkok--27 Jun--Asian Banker Fitch Ratings has just released a report on the Taiwanese banking sector titled "Taiwanese Banks: Annual Review and Outlook", which discussed Taiwanese banks' 2006/2007 performances, the latest developments in the troubled unsecured consumer lending segment, and key rating issues in 2007/2008. The report summarises the rating agency's rating actions on the Taiwanese banking sector between 2006 and 2007 to date, where negative rating actions have largely outnumbered positive rating actions. "The negative ratings mainly factor in the increasingly tougher liquidity conditions (particularly on smaller banks), rising funding cost amid an inverted yield curve, a continuous competitive pricing environment, and lingering adverse effects from delinquencies arising from the Consumer Debt Restructuring Programme (CDRP) for unsecured consumer credit borrowers," commented Jonathan Lee, Senior Director in Fitch's Financial Institutions team in Taipei. The positive rating actions were predominately driven by mergers and acquisitions, evidenced by the upgraded ratings of these acquired banks resulting from increased institutional support from their new foreign owners, usually sizable multinational banking groups with strong financial profiles. Positive rating actions based on intrinsic improvements were limited to Cathay United Bank (Individual rating 'B/C') and First Commercial Bank (Taiwan) (Long-term Foreign Currency Issuer Default Rating 'BBB+'/Positive). The report also has detailed analyses on Taiwanese banks' 2006 financial performance and looks into the latest asset quality performance of the troubled unsecured consumer lending segments in Taiwanese banks - following the bursting of the credit bubble in late 2005 - as well as the promising developments in Taiwanese banks' wealth management and offshore banking areas. The report identifies further merger and acquisition (M&A) activities, an inverted yield curve, risks in mortgage segments, ongoing bank recapitalisations and regulatory risks of the personal bankruptcy law as key rating issues in 2007 and 2008, discussing their likely rating implications on the banks. While the agency notes M&As generally push up the ratings of acquired banks, the report notes that any forced or regulatory-encouraged acquisition by large banks could potentially drag down the acquiring bank's own ratings. --www.theasianbanker.com (June 27 2007)--