PrintAdd to my bookmarksChinese page
Mega Financial Holding Co. Ltd.

 
2004/12/22



Analyst Chun Huang, CFA
Eunice Fan

RATIONALE
The 'twAA' long-term counterparty credit rating and 'twA-1' short-term credit rating on Mega Financial Holding Co. Ltd. (Mega) reflect the group's strong market position in Taiwan's financial services industry and its good financial profile. The ratings also factor in the relative subordination of the holding company compared with its major operating subsidiaries.

Mega is a relatively large financial group in Taiwan. Its net worth of NT$157 billion at the end of September 2004 ranked first among all FHC groups on the island and its consolidated assets of NT$2.0 trillion ranked second, just behind the Cathay FHC Group. Mega's three major subsidiaries include Chiao Tung Bank (CTB), International Commercial Bank of China (ICBC), and Chung Hsing Bills Finance (CHBFC), which are all leaders in their respective industry sectors and continue to play vital policy roles on the behalf of the Taiwan government. CTB is a leader in direct investment and has helped nurtured the development of government-supported industries. ICBC is a leader in the foreign exchange business, and CHBFC is a leader in providing short-term bills finance.

The Mega FHC group's financial profile is good. On a consolidated basis, its ratio of adjusted common equity to adjusted assets stood at 7.9% at the end of September 2004, which reflects a relatively comfortable level of capitalization considering the asset quality of its subsidiaries and the group's business mix. On an unconsolidated basis, the leverage of the holding company is acceptable. It had double leverage ratio of 119% at the end of September 2004, which is slightly higher than that of its domestic peers but is manageable if its profitability and capital-generation ability is considered. Mega FHC's leverage is expected to decline once its outstanding ECBs (NT$29 billion worth at the end of September 2004) are gradually converted into common shares in Mega.

Mega FHC's profitability is average, and is a reflection of its operating subsidiaries' state-run origins. The government still retains effective control of Mega FHC, holding a stake of about 23% at the end of June 2004. Mega FHC had an average return on equity of 12% in the full-year 2003 and the first half of 2004, and an average return on assets of 1% over the same period. Its profitability performance is not expected to change much in the near term as the reorganization of the Mega group is still in its early stage and more time is needed for synergies to evolve.

OUTLOOK: STABLE
The outlook reflects the expectation that Mega's relatively good financial profile and strong market position should enable it to maintain its credit profile and withstand normal market cyclicality over the medium term.

TRC Disclaimer:

Copyright © 2012 by Taiwan Ratings Corporation (TRC). All rights reserved.
No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of TRC. The Content shall not be used for any unlawful or unauthorized purposes. TRC and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively TRC Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. TRC Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. TRC DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall TRC be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. TRC's opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. TRC assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions.. TRC does not act as a fiduciary or an investment advisor except where registered as such. While TRC has obtained information from sources it believes to be reliable, TRC does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, TRC reserves the right to assign, withdraw or suspend such acknowledgement at any time and in its sole discretion. TRC disclaims any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

TRC keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of TRC may have information that is not available to other TRC business units. TRC has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

TRC may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. TRC reserves the right to disseminate its opinions and analyses. TRC's public ratings and analyses are made available on its Web sites, www.taiwanratings.com (free of charge), and rrs.taiwanratings.com.tw (subscription), and may be distributed through other means, including via TRC publications and third-party redistributors.