Rpt fitch affirms taiwans china bills finance corp at bbbstable

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(Repeat for additional subscribers)March 27 () - (The following statement was released by the rating agency)Fitch Ratings has affirmed Taiwan-based China Bills Finance Corporation's (CBF) ratings, including its Long-Term Issuer Default Rating (IDR) at 'BBB'. The Outlook is Stable. A full rating breakdown is provided at the end of this commentary. Rating Action RationaleThe affirmation reflects CBF's long established market position in the Taiwanese money market, its adequate capitalisation and its prudently-managed asset quality. These strengths have protected the company from the industry's structural weaknesses such as limited business scope, susceptibility to interest rate changes and reliance on wholesale funding. Key Rating Drivers - IDRs, National Ratings and VRsFitch expects CBF's core earnings to remain moderate in 2013, as rising funding costs and narrowed spread continue to pressure its interest income and trading gains. CBF reported a modest profit (annualised return on equity of 6.44%) for 9M12 following strong earnings in 2011, on account of one-off gains on a property disposal. CBF has been prudent in credit extensions, underpinned by a low exposure (end-9M12: 0.03% of total guarantees) to problematic loans and a comfortable provision coverage (above 1.5% of total guarantees in 2010-9M12). CBF's liquidity profile is adequately managed. Its high-quality fixed-income securities holdings and a contingent liquidity facility provided by Bank of Taiwan (AAA(twn)/Stable) partly mitigate potential risk arising from its reliance on wholesale funding. CBF's capital adequacy (CAR) and Fitch Core Capital (FCC) ratios declined to 12.7% and 13.3% at end-9M12, respectively, from 14.3% and 14.9% at end-2011, due to guarantee growth. However, Fitch views its capital buffer as adequate, given its modest risk profile.

Rating Sensitivities - IDRs, National Ratings and VRsThe Stable Outlook underlines Fitch's expectation that CBF will maintain adequate capitalisation and stable asset quality. CBF's ratings have limited upside potential. Negative rating action may result from deterioration in capitalisation and asset quality, possibly from aggressive risk-taking in pursuit of growth, though Fitch views this is unlikely in the near term. Industrial Bank of Taiwan's (IBT, CBF's largest shareholder, with a 28% stake) intended merger with CBF is still subject to shareholder and regulatory approval, which is not expected within Fitch's rating outlook horizon. Fitch believes that the rating implication for CBF post merger may be neutral, as the benefits of larger franchise and enhanced capital base could be potentially counterbalanced, if an aggressive growth strategy is pursued after the merger materializes.

Key Rating Drivers - Support Rating and Support Rating FloorCBF's Support Rating (SR) and Support Rating Floor (SRF) reflect the limited probability of government support, if needed. Rating Sensitivities - Support Rating and Support Rating FloorThe SR and SRF are potentially sensitive to changes in assumptions around the propensity or ability of the government to provide timely support to CBF. This would most likely be manifested in a change to Taiwan's sovereign rating (A+/Stable).

Established in 1978, CBF is Taiwan's third-largest bills finance company, with a 18.3% of market share of guarantees at end-2012. CBF's rating this site IDR affirmed at 'BBB'; Outlook StableShort-Term IDR affirmed at 'F3'National Long-Term rating affirmed at 'A+(twn)'; Outlook StableNational Short-Term rating affirmed at 'F1(twn)'Viability Rating affirmed at 'bbb'Support Rating affirmed at '4'Support Rating Floor affirmed at B+'