Fitch: Taiwan Citigroup Turns Negative Outlook

The international credit rating agency Fitch issued a press release today (4) to adjust the outlook for Citibank (Taiwan) commercial banks ’rating from stable to“ negative ”and confirm its long-term issuer ’s default rating (IDR) “A-“, and the domestic long-term rating is equal to “AA (twn)”, while confirming the individual strength rating “bbb +” of Citi (Taiwan).

Fitch noted that the adjustment of Citibank (Taiwan) ‘s rating outlook is consistent with the rating actions undertaken by its parent company Citibank (A + / Negative Outlook / a) and the final parent company Citigroup (A / Negative Outlook / a). Fitch pointed out that Taiwan is an export-oriented economy and will be severely affected by the impact of the global epidemic. Fitch adjusted the outlook of the Taiwan banking industry‘s operating environment rating from stable to “negative.”

Fitch pointed out that Citi (Taiwan) ‘s individual strength rating reflects its strong liquidity (storage ratio is 57%, which is lower than the industry average of 73%) and capital level (the first class capital ratio of common equity at the end of 2019 is 14.6%); but the deterioration of the operating environment will put pressure on Taiwan ’s banking industry, including Citi (Taiwan), in terms of asset quality and profitability in the near future.

Citi (Taiwan) has more high-liquidity, low-risk assets, including more than 40% of the bank ’s assets are US and Taiwan public debt, and short-term demolition of Citigroup subsidiaries. Will be slowed. The recent credit risk mainly comes from unsecured personal loans and credit card business. As of the end of 2019, the two accounted for 26% of total loans or 11% of total assets. Corporate loans may also be subject to related pressures, but because Citi (Taiwan) focuses on large and mature companies, it will offset the related default risks.

In addition, despite the continued pressure on the US dollar and Taiwan dollar spreads, non-interest income due to the slowdown of customer investment activities, and increased credit costs, Fitch expects that Citi (Taiwan) operating profit will account for weighted risk assets in 2020 Continue to be higher than the industry average (3.2% in 2019 and 1.2% in the industry).

Fitch expects that Citi (Taiwan) will maintain a good capital level in the near future, even if its weak profitability and high dividend distribution rate (about 70% in 2019) may bring some pressure on capital; as of 2019 At the end of the year, the Bank’s first class capital ratio of common equity was 14.6% (compared with 14.4% at the end of 2018), and the industry average was slightly higher than 11%. Citi (Taiwan) continued to maintain a deposit ratio lower than the industry average, which helps to mitigate the potential liquidity risk caused by the slowdown in deposit growth and the use of corporate lending quotas.

 

 

Reviewer overview

Fitch: Taiwan Citigroup Turns Negative Outlook - /10

Summary

The international credit rating agency Fitch issued a press release today (4) to adjust the outlook for Citibank (Taiwan) commercial banks ’rating from stable to“ negative ”and confirm its long-term issuer ’s default rating (IDR) "A-", and the domestic long-term rating is equal to "AA (twn)", while confirming the individual strength rating "bbb +" of Citi (Taiwan).

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