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Banks (Finance)

Moody's Affirms Cathay United Bank's Deposit Ratings at A1, Stable Outlook

Strategic Insights

— 2 min read

Cathay United Bank Co., Ltd., a Taiwanese bank, has maintained a stable outlook on its long-term deposit ratings at A1, according to Moody's Investors Service. This affirmation reflects the bank's strong fundamentals, including its asset quality, capitalization, and liquidity profile. Moody's expects the bank to maintain its strong fundamentals through 2025-2026, driven by prudent underwriting practices, government-initiated measures, and a high level of public support from Taiwan.

Key Takeaways:

  • Moody's has affirmed Cathay United Bank's foreign currency (FC) and local currency (LC) long-term (LT) bank deposit ratings at A1, with a stable outlook.
  • The affirmation reflects the bank's strong fundamentals, including its asset quality, capitalization, and liquidity profile.
  • Moody's expects the bank to maintain its problem loan ratio below 1%, core capital ratio stable, and profitability improving marginally through 2025-2026.
  • The bank's A1 ratings are supported by its baa1 Baseline Credit Assessment (BCA) and a three-notch uplift based on Moody's assessment of a very high level of public support from Taiwan.
  • Risks associated with the potential negative effects of changing U.S. trade policies may impact the bank's export-focused large corporates and small and medium-sized enterprise (SME) borrowers, but are largely mitigated by prudent client selection and adequate loan-loss reserves.
  • The bank's consolidated Common Equity Tier 1 (CET1) ratio stood at 11.08% as of the end of 2024 and is expected to remain stable in the next 12 to 18 months.
  • Cathay United Bank's profitability is expected to improve marginally, driven by momentum in wealth management and bancassurance income, partly offset by lower cross-currency swap income.
  • The bank's lending mix has shifted toward higher-margin foreign currency loans and new mortgages, supporting net interest income and contributing to a modest expansion in net interest margin.

Statistics:

  • TWD4.68 trillion (USD141 billion) total assets as of the end of March 2025 (Source: Moody's)
  • 90% of the bank's total liabilities due to customers (Source: Moody's)
  • 30% liquid banking assets to tangible banking assets as of 31 March 2025 (Source: Moody's)
  • 120.1% liquidity coverage ratio as of year-end 2024 (Source: Moody's)
  • 87% of clients in the main market as of March 2025 (Source: Moody's)
  • 12.5% tangible common equity (TCE)/risk-weighted assets (RWA) target for the bank's BCA (Source: Moody's)

Sources:

  • Moody's Investors Service (https://ratings.moodys.com/rmc-documents/432741)
  • Moody's Rating Methodologies (https://ratings.moodys.com)

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