May 9, 2017
Rating Research Services
………………………………………………………………………………………………………………………….
Media Release:
E.SUN Financial Holding And E.SUN Bank
Upgraded On Strong Capitalization;
Outlook Stable
Primary Credit Analyst:
Eva Chou; (886) 2 8722-5822; [email protected]
Secondary Contact:
Patty Wang; (886) 2 8722-5823; [email protected]
Overview

Taiwan-based E.SUN FHC has completed fundraising through a rights issue in May 2017 and plans
to use all of the funds to strengthen the capitalization of its core operating unit E.SUN Bank and
support the bank's business growth.

We have therefore revised our capital assessment for the bank and its holding company to strong
from adequate. We expect both entities to maintain strong capitalization for the coming two years.

We are raising our issuer credit ratings on E.SUN Bank to 'twAA/Stable/twA-1+' from 'twAA/Positive/twA-1+' and the ratings on E.SUN FHC to 'twAA-/Stable/twA-1+' from 'twA+/Positive/twA1'. At the same time, we raised the various issue ratings on the companies' outstanding debt.

The stable outlook reflects our expectation that E.SUN Bank will maintain a good business franchise,
strong capitalization, and good asset quality over the next two years.
Rating Action
Taiwan Ratings Corp. today raised its long-term issuer credit ratings on E.SUN Financial Holding
Co. Ltd. (E.SUN FHC) and E.SUN Commercial Bank Ltd. (E.SUN Bank). The outlook on the ratings
is stable. At the same time, we raised the short-term ratings on E.SUN FHC and affirmed the shortterm ratings on E.SUN Bank. We also raised our ratings on the various debts issued by the holding
company and bank, see 'Ratings List' below.
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May 9, 2017
Rationale
The upgrade action on E.SUN Bank reflects our view that the bank's capitalization will improve to a
strong level after its parent, E.SUN FHC, injects new capital into the bank in 2017. We believe
E.SUN Bank will be able to maintain strong capitalization, considering its capital policy and
moderate risk appetite in overseas expansion plan. That's despite the bank's overall above-average
loan growth target over the next two years. E.SUN FHC recently raised New Taiwan dollar (NT$)
10.5 billion from a rights issue and plans to inject the full amount into E.SUN Bank to strengthen
the bank's capital structure. This injection should help E.SUN Bank to sustain the local regulatory
common equity Tier 1 capital requirement above 10%, as well as support the bank's business
growth in the coming two years.
We expect E.SUN Bank's risk-adjusted capital (RAC) ratio to sustain at above 10% in 2017-2018,
given the management's prudent capital policy with a stronger capital buffer for the coming two
years. Although we expect E.SUN Bank to continue to pursue above average growth over the same
period, we believe the overall growth rate to be only a high-single-digit with the entity's risk
appetite remaining unchanged. E.SUN Bank has made several hybrid issuances over the past year
to strengthen its Tier 1 capitalization. The bank's RAC ratio was 10.3% at the end of 2016. In our
view, the improved capitalization strengthens E.SUN Bank's stand-alone credit profile as well as the
E.SUN FHC group's overall credit profile, given the bank's core status within the group.
The rating actions on E.SUN FHC follow our similar rating action on the group's core banking
subsidiary E.SUN Bank, given that the bank is the dominant subsidiary of the E.SUN FHC group.
The ratings on E.SUN Bank and E.SUN FHC continue to reflect our assessment of the group's
strong capitalization, superior asset quality, and strong management and strategy compared with
those of domestic peers. Counterbalancing factors include the group's moderate, albeit improving
profitability and small business scale by international standards. The ratings on E.SUN FHC also
reflect the relative subordination of the holding company to its core operating subsidiary, E.SUN
Bank.
Outlook
The stable outlook reflects our expectation that E.SUN Bank is likely to maintain its RAC ratio
above 10% backed by the bank's prudent capital policy and growth strategy over the next two
years. We also anticipate that the bank will maintain its sound asset quality despite its aboveaverage business growth in recent years. In addition, we expect E.SUN Bank to continue to play a
dominant role in terms of the E.SUN FHC group's overall risk profile.
Downside Scenario
We may lower the ratings on E.SUN Bank and E.SUN FHC if the bank fails to sustain its
capitalization at a strong level as indicated by a RAC ratio consistently below 10% in the coming
two years. This could result from an aggressive growth, for example double digit growth, and risktaking by the bank.
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May 9, 2017
Upside Scenario
We may raise the ratings on E.SUN Bank and E.SUN FHC if the bank can demonstrate successful
and continuing business diversification. This could be achieved by the entity's superior electronic
payment business, or superior wealth management business relative to Taiwan peers'. However,
we believe this is remote in the coming two years because it takes times to build a strong franchise
under Taiwan's very competitive environment.
Related Criteria
 General Criteria: Use Of CreditWatch And Outlooks - September 14, 2009
 Criteria - Financial Institutions - Banks: Quantitative Metrics For Rating Banks Globally:
Methodology And Assumptions - July 17, 2013
 Criteria - Financial Institutions - Banks: Bank Hybrid Capital And Nondeferrable Subordinated
Debt Methodology And Assumptions - January 29, 2015
 Understanding Taiwan Ratings Rating Definitions - November 18, 2014
 TRC Financial Services Sector Issue Credit Rating Criteria - September 23, 2014
 General Criteria: Group Rating Methodology - November 19, 2013
 Criteria - Financial Institutions - Banks: Banks: Rating Methodology And Assumptions - November
09, 2011
 Criteria - Financial Institutions - Banks: Banking Industry Country Risk Assessment Methodology
And Assumptions - November 09, 2011
 Criteria - Financial Institutions - Banks: Bank Capital Methodology And Assumptions - December
06, 2010
 Criteria - Financial Institutions - Banks: Revised Market Risk Charges For Banks In Our RiskAdjusted Capital Framework - June 22, 2012
 General Criteria: National And Regional Scale Credit Ratings - September 22, 2014
 General Criteria: S&P Global Ratings' National And Regional Scale Mapping Tables - June 01,
2016
 General Criteria: Methodology For Linking Long-Term And Short-Term Ratings - April 07, 2017
(Unless otherwise stated, these articles are published on www.standardandpoors.com, access to which requires a registered account)
Ratings List
Upgraded
To
From
Issuer Credit Ratings
twAA/Stable/twA-1+
twAA-/Positive/twA-1+
Unsecured Subordinated Debenture
twAA-
twA+
Unsecured Subordinated Debenture
twA+
twA
Issuer Credit Ratings
twAA-/Stable/twA-1+
twA+/Positive/twA-1
Unsecured Subordinated Bond
twA
twA-
E.SUN Commercial Bank Co. Ltd.
E.SUN Financial Holding Co. Ltd.
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May 9, 2017
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