OREANDA-NEWS. Fitch Ratings has assigned Citibank Taiwan Limited (CTL) a Viability Rating (VR) of 'bbb+' and affirmed CTL's Long-Term Issuer Default Rating (IDR) at 'A' and National Long-Term Rating at 'AA+(twn)'. The Outlook is Stable. A full list of rating actions is at the end of this rating action commentary.

The affirmation follows Fitch's rating action on Citigroup Inc. (Citi, A/Stable/a), CTL's ultimate parent, on 15 June 2016 (see "Correction: Fitch Affirms Citigroup's Long-Term IDR at 'A'; Outlook Stable").

KEY RATING DRIVERS

IDRS, NATIONAL RATINGS AND SUPPORT RATING

The IDR and Support Rating of '1' on CTL reflects the extremely high probability of support from its parent, Citibank N. A. (A+/Stable/a, Citi's major operating subsidiary), if needed. CTL's IDR is aligned with Citibank N. A.'s Viability Rating and their rating Outlooks are also aligned, given CTL is a core part of the group's global banking franchise, they have highly integrated operations in risk management, a shared brand name and are part of a global network. Among Citi's Asian subsidiaries, CTL is one of the important contributors to the group's liquidity and earnings.

Like many of Citi's international subsidiaries, CTL is not specifically named as a material legal entity (MLE). The recovery and resolution plan of Citi, along with those of other global banks, continues to evolve, including the designation of MLEs and the positioning of internal total loss-absorbing capacity (TLAC). As a consequence Fitch may reassess the parent and subsidiary linkages of CTL as these issues become more permanent.

VR

CTL's VR reflects a niche, sustainable and profitable franchise with a sound risk buffer relative to its risk profile. This is underpinned by the local management's ability to use Citibank's global platform and brand recognition in Taiwan to consistently deliver above-sector-average earnings. CTL has developed its niches in cross-border financing, cash management, trade finance, financial advisory in M&A and introducing innovative wealth management and credit card products in Taiwan.

CTL reported a stable return on assets of 1% in 1H16 because non-interest income generation from wealth management, credit cards and derivatives has continued to be robust. The sector's average ROA was 0.65%. Its impaired loan ratio rose to 1.6% at end-1H16 from 1.3% at end-2014). Fitch expects CTL's strong loan-loss provisioning to help absorb rising credit costs in a slowing economy.

The bank's strong internal capital generation will help sustain its above sector-average capitalisation. Its Fitch Core Capital ratio fell to 11.3% at end-1H16 from 12.4% at end-2015 due to a dividend payout. The median ratio for Fitch-rated peers was 10.1% at end-1H16.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS AND SUPPORT RATING

CTL's IDR and Support Rating are sensitive to any change in the ability and propensity of Citibank N. A. to provide timely support to CTL. The ratings would also be affected by the evolution of the group's recovery and resolution plan, which may lead to the introduction of a notching of the IDR relative to the parent's VR.

VR

The bank's VRs could be upgraded if its franchise strengthens or is more diversified and becomes comparable to that of better-rated large local rivals. A VR downgrade could result from unexpected deterioration in capitalisation or its risk profile, or excessive growth or risk-taking, particularly in high-risk high-return unsecured personal loans.

The rating actions are as follows:

CTL

Long-Term IDR affirmed at 'A'; Outlook Stable

Short-Term IDR affirmed at 'F1'

National Long-Term Rating affirmed at 'AA+(twn)'; Outlook Stable

National Short-Term Rating affirmed at 'F1+(twn)'

Viability Rating assigned at 'bbb+'

Support Rating affirmed at '1'