Bangkok--28 Sep--Fitch Ratings
Fitch Ratings has today affirmed Bangkok Bank Public Company Limited's (BBL) Long-term foreign currency Issuer Default Rating (IDR) at BBB+' with a Stable Outlook. The list of all rating actions is included at the end of this release. BBL's ratings are based on its strong domestic and regional franchise, resilient profitability, solid reserves and capital levels and strong deposit base, although NPLs remain higher than its regional peers. Despite the weak operating environment and political turmoil over the past two years, BBL's profitability has been stable. The agency expects BBL's performance to remain strong, particularly amid an improving domestic economic outlook. Fitch recently revised Thailand's GDP growth forecast to 7.2% in 2010 and 4.3% in 2011.
While corporate and SME lending remains BBL's core strength - 41% and 28% of total loans, respectively - its retail loan portion of 13% is expected to grow strongly in the medium-term. The bank also benefits from the overseas loan exposure, mainly in China, Hong Kong, Singapore and Taiwan, at 18% of total loans.
Asset quality appears stable, although special mention loans rose in H110 (2.6% of loans). Non-performing loans (NPLs) at end-June 2010 declined slightly to THB55.1bn (4.7% of total loans) from THB55.6bn (4.9%) at end-2009, but still remain higher versus regional peers due to legacy NPLs from the 1997-1999 crisis. This risk is offset by the bank's high reserve coverage at THB71bn or 127.9% of NPLs at end-June 2010.
BBL also has a strong liquidity position, helped by its solid deposit franchise and by one of the largest branch networks in Thailand. The bank's reliance on wholesale funding remains low. BBL's capital position remains strong with 12.9% Tier 1 and 15.9% total capital ratios at end-June 2010. Equity to assets was 12.1% at end-June 2010.
Given BBL's size and systemic importance to the Thai financial sector and economy, Fitch believes that there is a high probability the bank would receive state support, should the need arise. The bank's Long-term foreign currency IDR is currently rated one notch above the foreign currency sovereign rating, at the country ceiling. This is based on its strong stand-alone financial position and its ability to withstand a severe deterioration in credit environment, including a moderate holding of government securities (13% of total assets at end-June 2010) and limited government ownership. A weakening in its financial position or a downgrade of the country ceiling could impact the Long-term foreign currency IDR. A sustained improvement in the bank's profitability and asset quality comparable to regional peers, as well as the maintenance of strong capital and liquidity could positively impact the Individual Rating.
BBL is Thailand's largest bank, with a 17% market share of loans and 19% of deposits at end-June 2010. It was established in 1944 by the Sophonpanich family, whose stake has fallen significantly following the country's 1997 financial crisis. The bank's ownership is now widely dispersed, with foreign (mainly institutional) shareholders holding about 49%, although the family still participates at board level, and is also involved in the management of the bank. BBL has 968 domestic and 15 offshore branches, mainly in Asia, and subsidiaries in securities and fund management.
Today's rating actions are as follows:
Long-term foreign currency Issuer Default Rating (IDR) affirmed at 'BBB+'; Stable Outlook
Short-term foreign currency IDR affirmed at 'F2';
Individual Rating affirmed at 'C';
Support Rating affirmed at '2';
Support Rating Floor affirmed at 'BBB-';
Long-term National Rating affirmed at 'AA(tha)'; Stable Outlook;
Short-term National Rating affirmed at 'F1+(tha)';
Long-term foreign currency senior unsecured notes affirmed at 'BBB+';
Long-term foreign currency subordinated debt affirmed at 'BBB'; and
National Long-term subordinated debt affirmed at 'AA-(tha)'.
For further details, please refer to the rating action commentary, "Fitch Revises Major Thai Banks' Outlooks to Stable", dated 30 November 2009.
Contacts:
Primary Analyst
Narumol Charnchanavivat
Director
+662 655 4763;
Fitch Ratings (Thailand) Limited
55 Wireless Road
Lumpini, Patumwan
Bangkok 10330
Secondary Analyst
Vincent Milton
Senior Director
+662 655 4759