OREANDA-NEWS. Fitch Ratings has affirmed Taiwan-based Bank SinoPac's (BSP) and its parent SinoPac Financial Holdings Company Limited's (SPH) Issuer Default Ratings (IDR) at 'BBB' with Stable Outlooks. A full list of rating actions is provided at the end of this commentary.

KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND VIABILITY RATINGS
The affirmation of BSP's IDR and Viability Rating (VR), as well as the Stable Outlook, reflects the prospects of a stable earnings and risk profile with sound capitalisation. As with its peers, BSP's China exposure declined to 15% of assets at end-1H15 from 18% at end-2014 amid China's economic slowdown and monetary easing. BSP's credit profile could alter when its China credit rises rapidly and meaningfully along with its strategic alliance with Industrial and Commercial Bank of China (ICBC; A/Stable) and its local subsidiary incorporated in Nanjing.

BSP's asset quality is sensitive to its concentration in mortgages and China exposure. Mortgages made up 48% of total loans at end-1H15 and are generally of low risk, with loan-to-value that averaged 56% and collateral mostly in selected liquid markets. About 48% of its China credits are for short-term trade finance, which are guaranteed by Chinese banks, while the rest is spread across corporate lending, interbank placement, and investment-grade bank debentures.

The affirmation of the IDR and VR of SPH is in line with the rating action on its principal banking subsidiary, BSP. BSP anchors SPH's ratings because of their high level of integration, and SPH's manageable leverage.

SUPPORT RATING AND SUPPORT RATING FLOOR
BSP's Support Rating (SR) of '3' and Support Rating Floor (SRF) at 'BB+' reflect its moderate systemic importance and a moderate probability of state support, if needed.

RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND VIABILITY RATINGS
The Stable Outlook reflects Fitch's expectation that BSP will sustain its performance in asset quality and profitability. Its ratings are constrained by uncertainties over the growth of its China exposures. A significant increase in appetite for profits that compromise its risk profile could trigger a downgrade. Any rating action on BSP could trigger a similar move on SPH's ratings.

SUPPORT RATING AND SUPPORT RATING FLOOR
The SR and SRF are sensitive to any change in assumptions around the propensity or ability of the Taiwan government to provide timely support to these banks. This would most likely be manifested in a change to Taiwan's sovereign rating (A+/Stable).

A Credit Update on SPH and BSP will be available shortly at www.fitchratings.com.

The rating actions are as follows:

SinoPac Financial Holdings:
Long-Term IDR affirmed at 'BBB'; Outlook Stable
Short-Term IDR affirmed at 'F2'
National Long-Term rating affirmed at 'A+(twn)'; Outlook Stable
National Short-Term rating affirmed at 'F1+(twn)'
Viability Rating affirmed at 'bbb'

Bank SinoPac:
Long-Term IDR affirmed at 'BBB'; Outlook Stable
Short-Term IDR affirmed at 'F2'
National Long-Term rating affirmed at 'A+(twn)'; Outlook Stable
National Short-Term rating affirmed at 'F1+(twn)'
Viability Rating affirmed at 'bbb'
Support Rating affirmed at '3'
Support Rating Floor affirmed at 'BB+'.