Fitch Downgrades UCBH Holdings' IDR to 'B+'; Remains on Watch Negative
2009-06-26 22:09:04 -
Fitch Ratings has downgraded the long-term Issuer Default Ratings (IDRs) of UCBH Holdings, Inc. (UCBH) and its bank subsidiary, United Commercial Bank, to 'B+' and 'BB-', respectively. The ratings remain on Rating Watch Negative. A full list of ratings appears at the end of this release.
The downgrade reflects the magnitude of credit deterioration in UCBH's loan book to date, as well as Fitch's expectation for a continued decline in asset quality. Fitch anticipates that loss rates will remain elevated given the company's exposure to commercial real estate, particularly its construction portfolio in the distressed real estate markets of California and Nevada. The rating action also considers UCBH's weak tangible common equity position relative to its significant exposure to commercial real estate. While regulatory capital ratios remain above well capitalized standards, it is largely due to the significant amount of preferred securities in the capital structure.
Further, the identified material weakness in internal controls regarding the misstatement of the loan loss allowance raises questions regarding the adequacy of UCBH's loan loss reserve in light of the deterioration of credit quality.
The Negative Watch considers the likelihood of further credit deterioration beyond the expectations incorporated in today's rating action, which would further stress the company's earnings and threaten its capital base. Fitch is looking for a stabilization in credit quality and for UCBH to sufficiently augment its capital position, given its credit challenges. To that end, UCBH has been in discussions with China Minsheng Bank for some time regarding a third stage investment in the company, which should aid capital levels. Upon consummation of a third stage investment, China Minsheng Bank would hold a 20% stake in UCBH.
Currently, China Minsheng Bank is a 9.9% owner. However, Fitch would anticipate UCBH pursuing other capital raising initiatives.
Fitch assigns Recovery Ratings to individual security issues where the IDR of the issuer is rated in the single-B or below category. As such, Fitch has assigned a Recovery Rating of 'RR6' to the preferred and trust preferred securities of UCBH, which implies recovery between 0%-10% on these securities in the event of failure or default by the issuer.
UCBH is a $13 billion banking company headquartered in San Francisco with domestic operations in Atlanta, Boston, Houston, New York City and Seattle, and a growing presence in the greater China region. UCBH focuses on servicing the major Asian communities in the U.S.
Fitch has downgraded the following ratings.
UCBH Holdings, Inc.
--Long-term IDR to 'B+' from 'BB'; on Rating Watch Negative;
--Preferred Stock to 'CCC/RR6' from 'B+';
--Individual to 'D' from 'C/D'; on Rating Watch Negative.
United Commercial Bank
--Long-term IDR to 'BB-' from 'BB+'; on Rating Watch Negative;
--Long-term Deposits to 'BB' from 'BBB-'; on Rating Watch Negative;
--Short-term Deposits to 'B' from 'F3'; on Rating Watch Negative;
--Individual to 'D' from 'C/D'; on Rating Watch Negative.
UCBH Trust Co.
UCBH Capital Trust I
UCBH Capital Trust II
UCBH Capital Trust III
UCBH Capital Trust IV
UCBH Capital Trust V
UCBH Holdings Statutory Trust I
UCBH Holdings Statutory Trust II
--Trust Preferred Securities to 'CCC/RR6' from 'B+'.
The following ratings remain on Negative Watch.
UCBH Holdings, Inc.
United Commercial Bank
--Short-term IDR 'B'.
Fitch has affirmed the following ratings.
UCBH Holdings, Inc.
United Commercial Bank
--Support at '5';
--Floor at 'NF'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. .
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.
Fitch Ratings, New YorkKenneth Ritz, 212-908-0368John
Mackerey, 212-908-0366orMedia Relations:Brian Bertsch,
212-908-0549Email: brian.bertsch@fitchratings.com : mailto:brian.bertsch@fitchratings.com
