NOTE: On December 31 2012, the press release was revised as follows: Added "Moody's Consolidated Global Bank Rating Methodology" published in June 2012 as a methodology for Fubon Financial Holding Co Ltd (Fubon Financial). Revised release follows:
Hong Kong, December 28, 2012 -- Moody's Investors Service has affirmed the Baa1 issuer rating of
Fubon Financial Holding Co Ltd (Fubon Financial) with a stable outlook.
At the same time, Moody's has affirmed the A2 deposit and
C- bank financial strength ratings (baseline credit assessment
of baa2) of Taipei Fubon Commercial Bank Co Ltd (Taipei Fubon Bank) with
a stable outlook.
This follows Fubon Financial and Taipei Fubon Bank's announcement
of the proposed acquisition of First Sino Bank, headquartered in
Shanghai, China. Specifically, Taipei Fubon Bank will
acquire 51% and Fubon Financial will acquire the other 29%.
Total consideration of the transaction is RMB6.45 billion (TWD30.6
billion), which includes a capital injection of RMB0.8 billion
to First Sino Bank. In addition to internal cash resources,
Fubon Financial will issue new shares of TWD20-25 billion to pay
for the transaction, of which about TWD10-15 billion will
be injected into Taipei Fubon Bank. The transaction is subject
to regulatory approvals of Taiwan's Financial Supervisory Commission,
Investment Commission of the Ministry of Economic Affairs and the China
Banking Regulatory Commission. It is expected to close in the second
quarter of 2013.
Moody's notes that the affirmation of both Fubon Financial and Taipei
Fubon Bank's ratings are dependent on the new share issuance being
successful. If Fubon Financial is not able to raise capital successfully
from the equity market, Moody's will revisit both the ratings
of Fubon Financial and Taipei Fubon Bank should the transaction be funded
by other sources, such as debt.
RATINGS RATIONALE
The affirmation of Fubon Financial's rating with a stable outlook
reflects that the acquisition will not materially change the credit profile
of Fubon Financial. This is because 1) First Sino will be a very
small part of the overall Fubon group (~5% of total assets,
capital and earnings); 2) First Sino's capital and asset quality
are sound; and 3) the financing is largely equity-funded which
would not significantly raise the leverage of Fubon Financial.
The affirmation of Taipei Fubon Bank's ratings with a stable outlook
reflects that the bank's capitalization will not be materially affected
following the acquisition. This is because the transaction will
mostly be funded by capital injections from its parent Fubon Financial.
As a result, the bank's core capital ratio (per Basel III
guidelines) will not change materially, and will drop only marginally
to a range 9.3%-9.8% (depending on
the size of equity issuance by Fubon Financial and the resultant capital
injection) from 9.9% as of end-September 2012.
This level of pro forma core capital ratio is still within our expectations
for the current rating of Taipei Fubon Bank.
Moody's also considers that the financial profile of First Sino
Bank will not have a significant drag on Fubon Financial nor Taipei Fubon
Bank. First Sino Bank has a solid Tier 1 ratio of 14.3%
at end-2011. At end-2011, First Sino Bank's
asset quality is sound with an NPL ratio of 0.15% and a
coverage ratio of 927%. With the upcoming RMB1 billion capital
injection from the new shareholders, First Sino Bank's capital
position will support its business needs for the next two to three years.
Even though Moody's expects that Fubon Financial and Taipei Fubon
Bank will need to inject fresh capital into First Sino Bank beyond this
period to support its growth and expansion to offering services to domestic
corporate and individuals, we do not expect the amount needed to
be material given the small size of First Sino Bank relative to the group
or Taipei Fubon Bank.
First Sino Bank is a majority-owned foreign bank with 4 branches
and 10 sub-branches in 4 cities including Shanghai, Tianjin,
Suzhou and Shenzhen. Currently, around 60% of its
clients are Taiwanese corporates. Its loan books is mainly focused
on manufacturing, wholesale and retail, and property and construction.
The proposed acquisition of First Sino Bank, the first acquisition
of a mainland Chinese bank by a Taiwanese bank and financial holding company,
is consistent with Fubon Financial's long-term strategy to
offer a full package of financial services including banking, insurance,
and asset management in Greater China.
RATINGS LIST
The following ratings have been affirmed with a stable outlook:
Fubon Financial Holding Co Ltd -- Foreign currency issuer
rating at Baa1.
Taipei Fubon Commercial Bank Co Ltd -- long-term
local and foreign currency deposit rating at A2; short-term
local and foreign currency deposit rating at P-1; and bank
financial strength rating at C- (which maps to a baseline credit
assessment of baa2).
RATING METHODOLOGY
The principal methodologies used in rating Fubon Financial were Moody's Global Rating Methodology for Life Insurers published in May 2010, Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010, Global Securities Industry Methodology published in December 2006, and Moody's Consolidated Global Bank Rating Methodology published in June 2012. The principal methodology used in rating Taipei Fubon Bank was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
ABOUT THE COMPANIES
Fubon Financial Holding Co Ltd, based in Taiwan, is a diversified
financial holding company with subsidiaries, including Taipei Fubon
Bank, Fubon Life, Fubon Insurance, Fubon Securities
and Fubon Asset Management. As of June 30, 2012, its
total assets and shareholders' equity (on a consolidated basis) were TWD3.9
trillion and TWD241.2 billion, respectively.
Taipei Fubon Commercial Bank Co Ltd, headquartered in Taipei,
Taiwan, is the ninth-largest bank in Taiwan by loans at end-June
2012. At June 30, 2012, on a consolidated basis,
its total assets was TWD1.6 trillion.
REGULATORY DISCLOSURES
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
analyst and the Moody's legal entity that has issued each of the
ratings.
Sally Yim
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's affirms Fubon Financial and Taipei Fubon Bank's ratings
