Bank of Kaohsiung ratings lowered on weakened core earnings.Taipei, June 26, 2009 (CENS CENS Censor CENS Center for Embedded Networked Sensing (UCLA NSF) CENS Censorship CENS Centre d'Etudes Nucleaires de Seclay )--Taiwan Ratings Corp. (TRC TRC Noun (in South Africa) Truth and Reconciliation Commission: a commission which encourages people who committed human rights abuses or acts of terror during the apartheid era to reveal the truth about their crimes in return for immunity from prosecution ) recently lowered its long-term counterparty credit rating on Bank of Kaohsiung (BoK) to "from" and the short-term counterparty rating to "from". TRC also lowered the issue rating on BoK's unsecured subordinate debenture to "BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +' from". The outlook on the long-term rating is stable. The rating action reflects the erosion of BoK's core earning power Earning power Earnings before interest and taxes (EBIT) divided by total assets. earning power 1. The earnings that an asset could produce under optimal conditions. For example, AT&T may currently be earning $2. , which is unlikely to recover to previous levels over the next two years given its business profile with lower profit margins, slowing business momentum, and a likely increase in credit costs amid the current economic downturn. The bank's pre-loan loss provision return on average assets (ROAA ROAA Return on Average Assets (business, banking, accounting) ROAA Rural Oregon Arts Association ROAA Royce Online Account Access (Royce Fund Services, Inc. ) in 2008 was only 0.25%, much lower than the average of 0.54% over the past five years mainly due to the bank's lower profit margin and stiff market competition. In the first quarter of 2009, BoK still reported an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. ROAA of negative 0.22% while most peers reported profits. The bank's capital size has dropped to NT$9.2 billion (US$280.48 million at US$1:NT$32.8) at the end of March 2009, compared with NT$10.4 billion (US$317.07 million) at the end of 2007, mainly due to impairment losses from loan and overseas fixed income assets. BoK has become one of the smaller banks based on its smaller capital base, which is likely to constrain con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. business growth. The bank could face greater difficulty to restore its capitalization to previous adequate level over the next two years given its weakened core earning power. TRC noted the rating on BoK continues to reflect the bank's adequate funding and liquidity profile and adequate risk management and financial flexibility. The Kaohsiung City government's 46% ownership in the BoK partially supports the bank's financial flexibility. These strengths are tempered by the bank's weak profitability, higher than average credit risk, and concentrated revenue mix from its lending business. ((BS)) (GE) |
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