Fitch affirms Dah Sing Bank’s ratings
Fitch Ratings has affirmed Dah Sing Bank’s (DSB) Long-term Foreign Currency Issuer Default Rating of ‘A-’ (A minus), Short-term Foreign Currency Issuer Default Rating of ‘F2′,Individual Rating of ‘B’, and Support Rating of ‘3′. The bank’s support rating floor remains unchanged at ‘BB’.
At the same time, the agency has affirmed the ‘A-’ (A minus) ratings on its long-term deposits and senior unsecured notes, as well as the ‘BBB+’ ratings on its subordinated notes. The Outlook on the ratings remains Stable.
The ratings for DSB reflect its strong capitalisation, satisfactory profitability and prudent management. DSB’s operating income increased 42% in 2006, largely due to the full-year contribution from two small acquisitions made in late 2005 - Pacific Finance Limited and Banco Comercial de Macau. A significant improvement in its underlying profitability also helped, evidenced by higher interest margins (hard hit in 2005 by a sharp narrowing of the spread between the prime rate and Hibor), and fee income, thanks to increased brokerage and wealth management fees resulting from high trading volumes on Hong Kong’s buoyant stock market and more unit trust investments from its customers. While DSB’s 2006 return on average assets (ROAA) of 1.2% improved from 1.1% in 2005, it was still generally below its peers due to the bank’s weaker deposit-taking franchise and higher cost-of-funds. At end-2006, loans accounted for 49% of DSB’s total assets. Amid the benign economic conditions, credit costs were low in 2006 and loan quality remained good. The end-2006 impaired loans ratio stood at 0.52%, for which reserves were adequate. DSB’s capitalisation was substantial, with Tier 1 and total CARs of 11.7% and 16.2% respectively, albeit with the former somewhat below average for its peers. In April 2007, DSB purchased a 17% stake in Chongqing Commercial Bank (CCB) for HKD0.7 billion. CCB is financially sound, following a government-sponsored financial restructuring, with a clean loan book and satisfactory capitalisation. DSB expects to establish joint ventures with CCB in retail-based areas as credit cards. Established in 1947, DSB is a mid-sized commercial bank with a niche franchise in equipment financing and consumer lending. DSB is 75%-owned by the publicly-listed Dah Sing Financial Holdings (DSFH), whose largest shareholders are the Wong family with 39% and Bank of Tokyo-Mitsubishi UFJ (rated ‘A’) with 12%. — www.theasianbanker.com (June 29 2007)–