Rationale

 The ratings continue to factor in the dominant market position of CTBC Bank Co., Ltd. (CTBC; rated A1/Stable/P-1 by Moody’s Investors Service with baseline credit assessment (BCA) of baa1), which is one of the six systemically important banks in Taiwan with total assets of NT$ 6.05 trillion1 as on December 31, 2023. The ratings consider CTBC’s strong asset quality, comfortable capital position and the profitability of its global operations. CTBC’s Indian branches continue to have strong financial and operational linkages with the head office (HO) in Taiwan. The capitalisation and asset quality remain strong with the oversight and involvement of the HO in underwriting as well as liquidity monitoring. The profitability of the Indian branches improved in FY2024, driven by the capital infusion of Rs. 412 crore in Q1 FY2024, which supported the net interest margin and hence the return on assets (RoA). The capital infusion by the HO was made to support the business growth of the Indian branches. However, the return on net worth remains low and the bank’s (Indian branches) ability to maintain/enhance the same will remain a monitorable. The deposit franchise of the Indian branches is characterised by high depositor concentration and short tenures. Despite the short tenure of the liabilities, the liquidity of the Indian branches is supported by the short tenure of the advances, excess holding of Government securities (G-Secs) and a committed line of credit from the HO. Moreover, the Indian branches can borrow from interbank markets for any liquidity requirements. Going forward, ICRA will continue to monitor CTBC’s profile as this will remain a key driver of the credit profile of the Indian branches.