Bangkok--31 Oct--Fitch Ratings
Fitch Ratings has affirmed Thailand-based non-bank financial institution Finansa Public Company Limited's (FNS) National Long-Term Rating at 'BBB-(tha)' with a Negative Outlook. It also affirmed the company's National Short-Term Rating at 'F3(tha)'.
KEY RATING DRIVERS
The ratings and outlook reflect FNS's weak performance over the past few years, the company's relatively high level of capital and its track record in the financial advisory and merchant banking business.
The operating environment for Thailand's financial sector has been difficult for the past several quarters due to slow economic growth and weak investor sentiment in the securities sector. This has hurt FNS's performance, and it has recorded a loss in 1H14 after a return to profitability during 2013 when operating conditions were more positive.
FNS has been restructuring its operations, including an agreement to sell its asset management subsidiary in July 2014, and plans to improve the performance of its warehouse affiliate Prospect Development through asset sales. While the restructuring plans may improve the outlook for FNS's performance, the company's ability to sustain profits through the economic cycle remains uncertain.
This uncertainty is mitigated by FNS's sound capital structure. Shareholder commitment has been apparent following equity injections in December 2012 and May 2013, and the portion of equity to total assets remains strong at 79% as of 1H14.
RATING SENSITIVITIES
The Outlook could be revised to Stable if FNS is able to sustain its franchise in the current challenging operating environment, restructuring measures proceed as planned, and the company's key liquidity, capital and profitability metrics continue to improve.
A ratings upgrade appears unlikely under the company's current business structure, which has not proved it is able to generate profits through the business cycle. Meanwhile, FNS's ratings could be downgraded if the business profile and franchise is considered less viable for the current rating range and/or there is a material deterioration in leverage, a failure to maintain sufficient liquidity, or continued losses from underlying operations.