Fitch: Yuanta Group's Acquisitive Strategy to Weigh on Credit Strength
The group's strategy to expand overseas will likely improve the depth and breadth of the group's product platform and diversify its markets. However, Fitch expects the group's credit strength to weaken in the short to medium term because overseas expansion will result in weakened capitalisation from an expanded balance sheet and growing exposure to risks outside its home market.
Fitch placed most of the ratings of Yuanta Group on RWN when it announced its acquisition of Taiwan's Ta Chong Bank (Ta Chong). The RWN reflects the group's increased leverage and an expanded commercial banking operation, which has a weaker credit profile relative to its securities business, mainly Yuanta Securities Co., Ltd. (YS; BBB+/RWN). For more information on the rating action, see "Fitch Places Yuanta Group on Rating Watch Negative", published on 19 August 2015.
The Hanshin acquisition follows the group's purchase of TONGYANG Securities Inc., which is now called Yuanta Securities Korea Co., Ltd. (YSK), in 2014. The Hanshin transaction alone will not materially impact the group's financial or risk profile, given its relatively small size. Hanshin will account for less than 1% of the group's assets (including the acquisition of Ta Chong). All of the shares of Hanshin will be purchased via cash in a transaction valued at TWD3.648bn. The group plans to fund the transaction through a capital injection from YFHC to YCB. Fitch believes YCB's standalone capitalisation, including the merger with Ta Chong, will remain adequate after the Hanshin transaction.
Hanshin may be able to tap YSK's larger client base, but it is unclear how the Yuanta Group's Korean strategy will gain from the addition of Hanshin. The transaction also may not advance the group's overall aim to enhance profitability and generate synergies from its various acquisitions. Korea's banking sector is highly competitive, and Hanshin's limited customer base and product range are not likely to significantly improve the group's franchise. Hanshin's assets consist of mostly cash, and it plans to rebuild its retail lending book.
Комментарии