Moody's upgrades Bank of Taiwan baseline rating

Moody's Investors Service said it affirmed Bank of Taiwan's long-term and short-term deposit ratings at Aa3/P-1, upgraded the bank's baseline credit assessment and adjusted baseline credit assessment to Baa1 from Baa2 and affirmed its counterparty risk rating at Aa3/P-1 and counterparty risk assessment at Aa3(cr)/P-1(cr).

The outlook remains stable.

The upgrades take into account expected improvement in the bank's standalone credit profile, particularly its profitability and capitalization, Moody's said.

Taiwan's pension reform should lead to a gradual reduction in interest expense burdens for the bank, leading to a widening in its net interest margins and improved overall profitability over time, the agency said.

Meanwhile, Bank of Taiwan expects to report improved regulatory capitalization following a land transfer from the government in 2019, Moody's said.

The improvement in the bank's loss absorbing capability will bolster its ability to withstand potential adverse shocks should operating conditions worsen, the agency added.

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