NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the long-term Issuer Default Ratings (IDR) of Cathay General Bancorp (CATY) and its bank subsidiary, Cathay Bank at 'BB'. The Rating Outlook has been revised to Stable from Negative. A complete list of ratings is provided at the end of this release.
The ratings affirmation reflects CATY's strong capital position relative to the rating, improving asset quality metrics and an expectation of sustained profitability. Fitch's affirmation also considers the company's concentration in commercial real estate (CRE) portfolio (58% of loans). While Fitch believes CATY is still vulnerable to further losses in the portfolio given continued economic stress within its footprint, improved asset quality metrics and an adequate capital and reserve base mitigate these concerns.
Fitch's Outlook revision to Stable reflects improving asset quality trends. CATY's credit costs have been declining, as inflows of non-performing loans (NPLs) and early stage delinquencies have been trending down. If these trends continue, CATY's profitability should commensurately improve. The outlook also considers the company's relatively strong capital position, which is considered prudent and necessary given CATY's credit concentration and its current credit issues.
Although CATY's ratings are somewhat constrained by the company's substantial concentration in CRE, the company's ratings could move higher should positive credit trends continue and the company's profitability strengthens, while maintaining a sound capital and reserve base. Conversely, problem assets remain at stubbornly high levels despite improvements in other asset quality metrics, making CATY susceptible to further losses given the economic weakness in its primary markets in California. A reversal of the recent positive credit trends and the escalation of credit losses would negatively impact CATY's ratings.
CATY is a $10.8 billion bank holding company headquartered in Los Angeles, CA and focuses on the Asian banking market in its geographic footprint. CATY has expanded in the Asian-American communities across the country with a presence in New York, Chicago, Massachusetts, New Jersey, Texas, and Washington State.
Fitch has affirmed the following ratings with a Stable Outlook:
Cathay General Bancorp
--Long-term Issuer Default Rating (IDR) at 'BB';
--Short-Term IDR at 'B';
--Preferred stock at B;
--Individual at 'C/D';
--Support rating at '5';
--Support floor at 'NF'.
Cathay Bank
--Long-term IDR at 'BB';
--Long-term deposits at 'BB+';
--Short-term IDR at 'B';
--Short-term deposits at 'B';
--Individual at 'C/D';
--Support rating at '5';
--Support floor at 'NF'.
Additional information is available at www.fitchratings.com. The ratings above have been initiated by Fitch as a service to investors. The issuer did not participate in the rating process other than through the medium of its public disclosure.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 16, 2010);
--'Bank Holding Companies' (Dec. 30, 2009);
--'Equity Credit for Hybrids & Other Capital Securities-Amended' (Dec. 29, 2009);
--'Rating Hybrid Securities' (Dec. 29, 2009);
--'Short-Term Ratings Criteria for Corporate Finance' (Nov. 2, 2010).
Applicable Criteria and Related Research:
Short-Term Ratings Criteria for Corporate Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726
Rating Hybrid Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493086
Equity Credit for Hybrids & Other Capital Securities - Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493112
Bank Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493324
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.