Fitch: Taiwan finance companies face challenges

Fitch Ratings said Taiwan's bills finance industry continues to face a challenging operating environment in 2007 due to the unfavorable yield curve, concentrated investment portfolio and declining guarantee business.

Fitch said it believes that interest rate changes pose the greatest risk to the bills finance sector's financial soundness, given the industry's structural asset/liability duration mismatch. However, despite the challenging earning outlook in 2007, Fitch said it views the sector's outlook as stable due to its satisfactory asset quality and adequate capitalization, which should provide good support for bills finance companies to withstand the challenging environment.

Three of four rating changes in 2006 - the upgrade of Hua Nan Bills Finance Corp. (rated BBB-), the downgrade of Taishin Bills Finance Corp. (to BBB-) and the negative outlook on Chinatrust Bills Finance Corp. (rated A-)- were related to the changes to support ratings.

Fitch downgraded Great Chinese Bills Finance Corp.'s issuer default rating to 'restricted default' in January 2007 when the company faced a liquidity crisis. In 2006, two bills finance companies, E. Sun and Fubon, were absorbed by the banking arms of their financial holding companies. This type of internal consolidation is likely to be repeated, depending on the parent holding companies' capital needs, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.