Standard & Poor's Ratings Services said April 1 that itaffirmed the ratings of CTBCFinancial Holding Co. Ltd. and CTBC Bank Co. Ltd.
The rating agency affirmed CTBC Financial's long-term issuercredit rating at BBB and short-term issuer credit rating at A-3. The company's"cnA+" long-term and "cnA-1" short-term Greater Chinaregional scale credit ratings were also affirmed. The outlook on the long-termrating remains positive.
In addition, S&P affirmed CTBC Bank's long-term issuercredit rating at A- and short-term issuer credit rating at A-2, with a positiveoutlook. The bank's Greater China regional scale credit ratings were also affirmedat cnAA+/cnA-1.
The ratings actions follow the announcement that CTBC Bankplans to acquire a35.6% stake in Thailand's LHFinancial Group PCL.
The ratings affirmations reflect S&P's view that CTBCBank's planned stake acquisition will not materially weaken the bank's or itsparent company's risk-adjusted capital ratio, said Chris Lee, a credit analystat the rating agency.
S&P expects the bank's risk-adjusted capital ratio todecline to about 10% in the two years following the acquisition, from above 10%at the end of June 2015. The positive outlook on the ratings takes into accountS&P's expectation that the bank and its parent company will maintain theirrisk-adjusted capital ratio at 10%, while properly managing the capital needsand risk arising from organic and inorganic growth, Lee added.
S&P said it could upgrade the two companies' ratings ifCTBC Bank maintains its risk-adjusted capital ratio at above 10% via a prudentbusiness strategy and good earnings retention. Conversely, the outlook on theratings could be lowered to stable if the two companies pursue overlyaggressive expansion without adequate capital planning or a risk managementmechanism to manage fast business growth.
S&P Ratings and S&PGlobal Market Intelligence are owned by McGraw Hill Financial Inc.