OREANDA-NEWS. Fitch Ratings has today affirmed all the ratings for Taiwan-based CTBC Financial Holding Co., Ltd. (CTBC Holding) and its subsidiaries, including CTBC Bank Co., Ltd. (CTBC Bank), CTBC Life Insurance Co., Ltd. (CTBC Life) and CTBC Securities Co., Ltd. (CTBC Securities). The Outlooks on most of the ratings of these entities are Negative. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS
IDRS, VR, IFS RATING, AND NATIONAL RATINGS
The affirmation is based on Fitch's expectation that CTBC Bank's core capitalisation will remain in line with that of similarly rated peers in Asia-Pacific under the advanced internal rating-based approach and management's intention to further enhance the bank's capitalisation. Since the previous review, Tokyo Star Bank's (TSB) asset quality metrics have improved faster than projected in its original NPL reduction plan, showing signs of steady integration. The Negative Outlook reflects CTBC Bank's large appetite for acquisitions in high-risk emerging markets, and structurally diluted profitability caused by the inclusion of TSB. This could lead to excessive risk taking and complex integration challenges that could weaken the bank's risk profile.

CTBC Bank's Issuer Default Ratings (IDRs), Viability Rating (VR), and National Ratings, the anchor ratings for companies in the CTBC group, reflect its leading position in Taiwan's market, sophisticated risk management, and strong internal capital generation.

SUPPORT RATING AND SUPPORT RATING FLOOR
CTBC Bank's Support Rating (SR) and Support Rating Floor (SRF) are affirmed at '3' and 'BB+', respectively, reflecting the bank's moderate systemic importance and moderate probability of state support, if needed.

DEBT RATINGS
The ratings on the debt of CTBC Holding and CTBC Bank are also affirmed because they are notched from the companies' Long-Term IDRs, which are on par with CTBC Bank's VR, and National Long-Term Ratings.

SUBSIDIARIES AND AFFILIATED COMPANIES
CTBC Holding's ratings and Outlooks are aligned with those of CTBC Bank, based on the high level of integration between the two and the modest leverage and good standalone liquidity at the parent. The ratings and Outlooks of CTBC Securities are aligned with CTBC Holding's, reflecting the obligatory support from the holding parent under Taiwan's Financial Holding Company Act, the strong ability of the parent to provide support given the company's size, and its status as a core subsidiary of the group.

CTBC Life's Insurer Financial Strength (IFS) ratings take into account the high possibility of capital/liquidity support from CTBC Holding if needed. CTBC Holding is committed to maintaining CTBC Life's regulatory risk-based capital (RBC) ratio at above 250%. The acquisition of Taiwan Life Insurance Co., Ltd. (Taiwan Life) is scheduled to be completed by October 2015 and the company will merge with CTBC Life on 1 January 2016. CTBC Life's RBC ratio on a pro forma basis including Taiwan Life would be above 300% as of end-1H15. CTBC Holding plans to strengthen the consolidated entity's capitalisation for its future business growth.

RATING SENSITIVITIES
IDRS, VR, IFS RATING, NATIONAL RATINGS AND DEBT RATINGS
Fitch will likely take negative rating actions, albeit limited to one-notch downgrades, on the group's IDRs, VRs, IFS Ratings and National Ratings if CTBC Bank does not maintain its capitalisation at a level that provides sufficient buffer against risks related to additional expansions in the region.

Fitch could revise the Outlooks to Stable if CTBC Bank demonstrates discipline in taking regional growth risks while enhancing its balance-sheet strength.

Any rating action on CTBC Holding and CTBC Bank will trigger similar moves on their debt ratings.

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

The rating actions are as follows:

CTBC Financial Holding Co., Ltd.:
Long-term IDR affirmed at 'A'; Outlook Negative
Short-term IDR affirmed at 'F1'
National Long-Term Rating affirmed at 'AA+(twn)'; Outlook Negative
National Short-Term Rating affirmed at 'F1+(twn)'
Viability Rating affirmed at 'a'
Subordinated debt rating affirmed at 'A+(twn)'

CTBC Bank Co., Ltd.:
Long-Term Foreign Currency IDR affirmed at 'A'; Outlook Negative
Short-Term Foreign Currency IDR affirmed at 'F1'
National Long-Term Rating affirmed at 'AA+(twn), Outlook Negative
National Short-Term Rating affirmed at 'F1+(twn)'
Viability Rating affirmed at 'a'
Support Rating affirmed at '3'
Support Rating Floor affirmed at 'BB+'
Senior unsecured bonds' National Long-Term Rating affirmed at 'AA+(twn)'
Subordinated bonds' Long-Term Rating affirmed at 'A-' and National Long-Term Rating affirmed at 'AA(twn)'
Subordinated bonds' (Basel III tier 2 capital) National Long-Term Rating affirmed at 'AA-(twn)'
Perpetual non-cumulative New Taiwan Dollar subordinated bonds' (Basel III additional tier 1 capital) National Long-Term Rating affirmed at 'A(twn)'

CTBC Life Insurance Co., Ltd.:
Insurer Financial Strength (IFS) Rating affirmed at 'A'; Outlook Negative
National IFS Rating affirmed at 'AA+(twn)'; Outlook Negative

CTBC Securities Co., Ltd.:
Long-Term IDR affirmed at 'A', Outlook Negative
Short-Term IDR affirmed at 'F1',
National Long-Term Rating affirmed at 'AA+(twn)'; Outlook Negative
National Short-Term Rating affirmed at 'F1+(twn)'.