Moody’s takes multiple actions on three Taiwan financial institutions

Taipei, June 18, 2009 -- Moody's Investors Service has taken multiple 
rating actions on two banks and one financial holding company in Taiwan 
to reflect the stresses arising from the financial crisis.

The institutions are SinoPac Financial Holding Company, Hua Nan
Commercial Bank, and Taiwan Cooperative Bank.

Specifically, the following rating actions were taken, as announced by 
Cherry Huang, a Moody's Vice President and Senior Analyst.

(1) SinoPac Financial Holding Company (SinoPac FHC): Foreign currency
issuer rating is confirmed at Baa2 with negative outlook. This concludes 
our review for possible downgrade of SinoPac FHC's rating initiated on 
December 22, 2008.

(2) Hua Nan Commercial Bank: Outlook on D bank financial strength rating 
(BFSR), A3 local and foreign currency deposit ratings, Aa2.tw national 
scale deposit rating and P-1 short-term local and foreign currency 
deposit ratings is changed to negative from stable .

(3) Taiwan Cooperative Bank: Outlook on D BFSR, A2 local and foreign 
currency deposit ratings, Aa1.tw national scale deposit rating is changed 
to negative from stable.

Rating Actions on BFSRs

The BFSR outlook changes for both banks reflect Moody's concern that 
their core capital levels could be further weakened by the expected
deterioration in asset quality. In determining the BFSRs, Moody's 
assessed each bank's capital level after incorporating expected losses 
from risk assets using scenario analysis. The application of a 
forward-looking view on the banks' capital ratios is in line with Moody's 
reports "Calibrating Bank Ratings in the Context of the Global Financial 
Crisis" and "Moody's Approach to Estimating Bank Credit Losses and their 
Impact on Bank Financial Strength Ratings", published in February and May 
respectively this year. Both are available on www.moodys.com.

In general, for Taiwanese banks, weakening earnings and rising credit 
costs will pressure their already moderate to weak capital adequacy
levels, while capital raisings have proved challenging in a less
favorable market environment.

The system NPL ratio rose to 1.63% in April 2009 from 1.54% at end-2008 
and the NPL balance has yet to incorporate the restructured loans 
initiated by the government's debt-relief program. Credit costs are 
expected to continue rising, based on Moody's forecast of a 5.2% 
contraction for Taiwan's GDP in 2009.

The system's net interest margin came under pressure and narrowed to 
1.15% in 1Q2009 from 1.84% in 3Q2008 following consecutive rate cuts by 
2.375 percentage points by the central bank to 1.25% since last 
September. The contraction in interest margins is unlikely to reverse 
until 2H2009 when the re-pricing of costly time deposits will mostly 
occur.

Rating Action on Hua Nan Commercial Bank (HNCB)

The change of outlook to negative from stable of HNCB's BFSR reflects the 
bank's relatively weaker levels of capitalization and asset quality when 
compared to its D rated peers in Taiwan. Its NPLs are rising and grew by 
12% in 1Q2009. Stress testing also considered its cash dividend policy 
and potential liabilities arising from sales of PEMG-related investment 
products.

As a result of the BFSR outlook change, the outlook on HNCB's A3 deposit 
rating, Aa2.tw national scale deposit rating and P-1 short-term deposit 
rating was changed to negative from stable.

Rating Action on Taiwan Cooperative Bank (TCB)

The change of outlook to negative from stable of TCB's BFSR also reflects 
the bank's relatively weaker levels of capitalization and asset quality 
when compared to its D rated peers in Taiwan. Its NPLs are rising and 
grew by 10% in 1Q2009. Stress testing also considered its cash dividend 
policy.

As a result of the BFSR outlook change, the outlook on TCB's A2 deposit 
rating and Aa1.tw national scale deposit rating was changed to negative 
from stable. 

Rating Action on SinoPac FHC

SinoPac FHC's issuer rating was confirmed at Baa2 with negative outlook 
to reflect moderation in losses incurred by its two main operating
subsidiaries, namely Bank SinoPac (BSP) and SinoPac Securities.
Accessibility to long-term wholesale funding, including syndication and 
FRCP maturing in two to four years, also helped reinforce its debt 
servicing capability. 

However, the D+ BFSR and Baa1 long-term deposit ratings of BSP continue 
to carry a negative outlook to incorporate the expectation of further 
margin compression, weakening asset quality as well as potential 
liabilities associated with BSP's sale of PEMG-related products.

Further, the negative outlook on SinoPac FHC's Baa2 issuer rating aligns 
with the negative outlook on BSP's Baa1 deposit rating with the one notch 
differential representing structural subordination of creditors at 
holding company to those at the operating company level. 

PREVIOUS RATING ACTIONS & PRINCIPAL METHODOLOGIES

The last rating action on SinoPac Holdings was taken on December 22,
2008, when its Baa2 foreign currency issuer rating was placed on review 
for possible downgrade.

The last rating action on Hua Nan Commercial Bank was taken on Nov. 2, 
2007, when Moody's affirmed its D BFSR, A3/P-1 local and foreign currency 
deposit ratings, and long-term/short-term Taiwan national scale deposit 
ratings of Aa2.tw/TW-1, as a result of a merger with its sister company - 
Hua Nan Bills Finance Company. The outlook for all ratings was stable.

The last rating action on Taiwan Cooperative Bank was taken on December
7, 2007, when Moody's assigned first-time ratings. Its 
long-term/short-term local and foreign currency deposit ratings were A2 
and Prime-1 and bank financial strength rating (BFSR) was D. At the same 
time, Moody's Taiwan Corporation has assigned the bank national scale 
ratings (NSR): Aa1.tw for its long-term deposit rating and TW-1 for its 
short-term deposit rating. The outlook for all ratings -- global and NSR 
-- was stable.

The principal methodologies used in rating these issuers are the "Bank
Financial Strength Ratings: Global Methodology" (February 2007), and 
"Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A 
Refined Methodology (March 2007)".

The principal methodology Moody's used for rating FHCs was "Taiwanese
Financial Holding Companies: Moody's Rating Approach and Outlook"
(February 2003).

Moody's Taiwan Corporation used "National Scale Ratings in Taiwan" 
(October 2003) methodology in assigning both issuers' national scale 
ratings.

These can be found at www.moodys.com in the Credit Policy & Methodologies 
directory, in the Ratings Methodologies subdirectory. Other methodologies 
and factors that may have been considered in the process of rating this 
issuer can also be found in the Credit Policy & Methodologies directory.

SinoPac Holdings, headquartered in Taipei, Taiwan, had assets of NTD1.08 
trillion as of end-March 2009 on a consolidated basis.

Hua Nan Commercial Bank, headquartered in Taipei, Taiwan, had assets of 
NTD1.65 trillion as of end-March 2009.

Taiwan Cooperative Bank, headquartered in Taipei, Taiwan, had assets of 
NTD2.49 trillion as of end-March 2009.

The detailed ratings and actions are listed below:

SinoPac Group - 

SinoPac FHC's foreign currency issuer rating: confirmed at Baa2 with 
negative outlook

Bank SinoPac:

D+ BFSR and local and foreign currency short-term deposit rating of P-2: 
stable outlook unchanged

Baa3 BCA (baseline credit assessment) and Baa1 local and foreign currency
deposit ratings: negative outlook unchanged

Hua Nan Commercial Bank --

D BFSR, A3 local and foreign currency deposit rating, Aa2.tw national 
scale deposit rating and P-1 short-term local and foreign currency 
deposit rating: outlook changed to negative from stable

TW-1 national scale short-term deposit rating: stable outlook unchanged

Taiwan Cooperative Bank --

D BFSR, A2 local and foreign currency deposit rating, Aa1.tw national 
scale deposit rating: outlook changed to negative from stable

P-1 short-term local and foreign currency deposit rating and TW-1 
national scale short-term deposit rating: stable outlook unchanged