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Latest Rating : Fitch Affirms Taiwan's EXIM 'AA' Rating; OutlookStable

On 11 Nov 2024, Fitch Ratings has affirmed The Export-Import Bank of the Republic of China's (Taiwan EXIM) Long-Term Issuer DefaultRating (IDR) at 'AA', Short-Term IDR at 'F1+', National Long-Term Rating at 'AAA(twn)' and National Short-Term Ratingat 'F1+(twn)'. The Outlook is Stable. Fitch has also affirmed the National Long-Term Rating on the bank's seniorunsecured bonds at 'AAA(twn)'.


Ratings Driven by Government Support: Taiwan EXIM‘s Issuer Default Ratings (IDRs) are driven by its GovernmentSupport Rating (GSR), which is aligned with Taiwan's Long-Term IDR (AA/Stable/F1+). This reflects Fitch Ratings’expectation of an extremely high propensity of extraordinary support from the government, if needed, given the bank'sunique and important policy mandate and full state ownership.

Policy Role: Taiwan EXIM is the only policy bank in Taiwan. The bank aims to support the government's economicand trade policies through the provision of financing, credit guarantees, and credit insurance. It was established underThe Export-Import Bank of the Republic of China Act and is supervised by the Ministry of Finance (MoF). Under thisact, the government is obliged to cover any net losses not offset by the bank's own reserves.
The bank’s policy role has been further enhanced over the years, evident from the government’s rights issues andincreasing funding, which have helped to expand its lending capacity. The bank has been responsible for the NationalCredit Guarantee Administration to promote domestic green energy infrastructure and the Central and EasternEuropean Investment Fund Program to boost overseas trade cooperation. We expect Taiwan EXIM's prominent role tocontinue, particularly given Taiwan's export-dependent economy.

Government-Backed Funding: We believe Taiwan EXIM's refinancing risk is low and expect the authorities tocontinue supporting the bank's funding to boost its growth. The bank does not accept deposits and relies on wholesalefunding, while maintaining strong linkages to the government. As of end-September 2024, 42% of its total fundingcomes from the central bank, with another 24% from other government agencies, remaining stable compared to end-2023.

Capital Injection Plan on Track: The government has consistently provided ordinary capital support, including to theapproval of TWD 10 billion in aggregate capital, to be distributed between 2023 and 2027 from the MoF’s annualbudget. TWD 2 billion has already been funded in 2023 and 2024, respectively, and common equity Tier 1 was at27.6% at end 1H 2024 (2023: 26.3%). The government has also waived dividend distributions from the bank. Webelieve that the bank’s capital structure supports its policy mission of expanding international trade and economicactivities, as well as its focus on financing public infrastructure and green energy projects.

Prudently Managed Financials: We expect Taiwan EXIM to continue prudently managing its balance sheet whilemaintaining modest profitability as it executes government policies. The bank’s operating profit/risk-weighted assetratio improved to 1.2% (annualized) in the first half of 2024, up from 0.9% at the end of 2023. This improvement wasdriven by growth in lending and rising TWD interest rates. The bank also maintains robust asset quality, with a minimalnon-performing loans ratio of less than 0.1% over the years.

Highest Rating on National Scale: Taiwan EXIM's National Long-Term Rating of 'AAA (twn)' is at the highest end ofour Taiwan national rating scale, reflecting extremely low default risks relative to other issuers based in Taiwan. TheStable Outlook on the National Rating is aligned with that on the bank's Long-Term IDR. The senior unsecured bondsare rated at the same level as the bank's National Long-Term Rating, in line with Fitch's criteria.







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