TEXT-S&P summary: DBS Bank (Taiwan) Ltd.

(The following statement was released by the rating agency)

Nov 30 -

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Summary analysis -- DBS Bank (Taiwan) Ltd. ------------------------ 30-Nov-2012

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CREDIT RATING: A+/Stable/A-1 Country: Taiwan

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Credit Rating History:

Local currency Foreign currency

05-Dec-2011 A+/A-1 A+/A-1

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Outlook

The stable outlook reflects our expectation that DBS Taiwan will maintain its current credit

profile over the next one to two years including "strong" capitalization and "average" funding

and "adequate" liquidity, supported by the group's prudent financial policies and satisfactory

risk management. We also expect DBS Taiwan to remain a "highly strategic" member of the DBS

group. As such, the ratings on DBS Taiwan will move in tandem with those on its parent group.

We may lower the ratings on DBS Taiwan if evidence shows that the capacity and willingness

of the DBS group to support DBS Taiwan significantly weakens. Conversely, we may raise the

ratings on DBS Taiwan if the bank becomes a core member of the DBS group.

Rationale

The ratings on DBS Bank (Taiwan) Ltd. (DBS Taiwan) reflect the bank's 'bbb' anchor,

"moderate" business position, "strong" capital and earnings, "moderate" risk position, "average"

funding and "adequate" liquidity, as our criteria define those terms. The ratings also reflect

the implicit support from DBS Bank Ltd. (AA-/Stable/A-1+) due to the bank's "highly

strategic" status to the DBS group. The stand-alone credit profile (SACP) of DBS Taiwan is

'bbb-'.

Anchor

Our bank criteria use our Banking Industry Country Risk Assessment (BICRA) economic risk and

industry risk scores to determine a bank's anchor, the starting point in assigning an issuer

credit rating (ICR). The anchor for a bank operating only in Taiwan is 'bbb'. The BICRA score is

informed by our evaluation of economic risk; we view Taiwan as a middle-income, moderately

stable economy with a dynamic private sector, manageable growth in asset prices in recent years,

and strong household net financial positions. These factors somewhat offset the intermediate

level of private sector indebtedness, in our view. With regard to industry risk, we characterize

Taiwan's banking sector as highly competitive and fragmented. This results in very low earning

capacity to cushion against potential credit costs during economic downturns. Nonetheless, very

strong and stable system-wide funding partly offset these weaknesses.

Business position

In our assessment, DBS Taiwan has a "moderate" business position. As of the end of June

2012, the bank has total assets of New Taiwan dollar (NT$) 251.3 billion, representing about

0.7% of domestic banking system assets. We expect the bank to maintain a similar business

position over the next one to two years, due to the constraint of its moderate network

distribution and the bank's relatively short operating record in Taiwan's competitive banking

system. This is despite our expectation that DBS Taiwan will leverage group resources and

support to make above-average growth over the next one to two years. DBS Taiwan has a higher

presence in corporate banking than in retail banking. We believe it will take time for the bank

to establish a satisfactory and stable retail customer base.

Capital and earnings

Our assessment of DBS Taiwan's "strong" capital and earnings reflects our expectation that

the bank will be able to maintain its risk-adjusted capital (RAC) ratio before diversification

above 10% in 2012 and 2013. As of the end of June 2012, DBS Taiwan's RAC ratio was about 13.4%.

We believe that DBS Taiwan will maintain strong capitalization during the current period of high

asset growth as supported by the group's prudent financial management. This includes

conservative capital ratio targets and a high earning-retention policy on DBS Taiwan. Despite

the weak earnings capacity of DBS Taiwan due to its small operating scale and higher expense

level during the current expansionary stage, we expect the parent to provide additional capital

resources if needed.

Risk position

We consider DBS Taiwan's risk position to be "moderate" in view of the bank's relatively

higher risk concentration on single-name exposures and above-average asset growth strategy by

domestic standards. Although the bank follows the group's satisfactory underwriting and risk

control standards, it will take time to see if DBS Taiwan's fast initial growth stance will

dilute its overall asset quality and profit margins amid highly competitive market and global

economic slowdown. DBS Taiwan's higher-than-average risk concentration on several large groups

is mainly due to the fact that its previous branch status loan extensions are benchmarked with

the parent DBS Bank's total net worth, which is significantly higher than that of DBS Taiwan.

The bank plans to gradually dilute the concentration via expanding its loan scale with focuses

on the small to mid-size enterprise and retail sectors. This, however, will take time to

materialize.

Funding and liquidity

In our view, DBS Taiwan's funding is "average" and liquidity "adequate," supported by the

DBS Bank group's resources and name association. As of the end of June 2012, customer deposits

accounted for about 65% of the bank's total adjusted assets, up from 56% in 2010. Despite its

higher-than-average loan-to-deposit ratio and a moderate usage of wholesale funding (mainly

intra-group funding), we believe that DBS Taiwan will continue to make progress to establish its

retail deposit base and franchise and develop more diversified funding sources over the next two

to three years.

External support

The long-term counterparty credit rating factors in a high degree of implicit group support,

reflecting the bank's "highly strategic" status to its parent DBS Bank. DBS Taiwan is highly

important in supporting the group's Asian-centric business strategy, and is part of the group's

Greater China platform and franchise. We believe that the group will continue to provide

necessary financial support to DBS Taiwan in times of need.

Related Criteria And Research

-- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011

-- Group Rating Methodology And Assumptions, Nov. 9, 2011

-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011

-- Credit FAQ: Greater China Credit Rating Scale Explained, April 27, 2011

-- Bank Capital Methodology And Assumptions, Dec. 6, 2010

Source: http://news.yahoo.com/text-p-summary-dbs-bank-taiwan-ltd-071353552--sector.html

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