INDUSTRIAL SECURITIES CO.,LTD.
Fitch Ratings has assigned
The Outlook is Stable.
Industrial is 29.16% owned by the
Industrial is a fully licensed securities firm in
Key Rating Drivers
Support-Driven Ratings: Industrial's IDR and SSR are underpinned by Fitch's expectation that extraordinary shareholder support would be forthcoming from the
The ratings reflect Industrial's important role in providing comprehensive capital market services to support the province's financial and social development and stability, the
Strong Strategic Alignment: Industrial serves an important role in supporting
In addition, Industrial works with various city governments in
Relatively Stable Profitability: Industrial's profitability, measured by operating income/average equity, rose to an annualised 9.2% in 1H23, from 7.8% in 2022. The increase was due mainly to fair-value gains from proprietary trading positions, as capital-market sentiment recovered gradually from severe Covid-19 restrictions. Industrial has exhibited greater stability in earnings than its peers in market downturns due to its more meaningful product diversification. However, its return profile is inherently susceptible to changes in the economy and market sentiment.
Healthy Capital Position: Industrial has consistently maintained adequate leverage relative to the business risks it undertakes, retaining an adequate capital buffer against unexpected market shocks. Its net adjusted tangible leverage has stayed in the range of 3.0x-3.6x over 2019-1H23.
Reliance on Wholesale Funding: Industrial, similar to its industry peers, relies on short-term wholesale funding and uses repo transactions to fund its bond investments. Industrial mitigates the risk by having adequate underlying collateral against the repos, mainly in the form of government, financial and corporate bonds that are of adequate quality. In addition, the company's strong relationships with the local government and financial institutions also help support its funding and liquidity profile.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Negative rating action could occur if Fitch sees a weakening in the linkage between the
Weakening of the provincial government's propensity to support Industrial, either as perceived by Fitch or evident from a material delay or shortfall in capital and liquidity provision when needed, will also lead to a rating downgrade.
The IDR and SSR are also sensitive to Fitch's assessment of
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Positive rating action could be triggered if Fitch sees significant strengthening of linkages between the
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
Industrial's IDR and SSR are underpinned by Fitch's expectation that extraordinary shareholder support would be forthcoming from the
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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