Bangkok--18 Oct--Fitch Ratings
Fitch Ratings has today assigned a rating of 'BBB+' to Bangkok Bank Public Company Limited's (BBL; 'BBB+'/Stable) 5-year and 10-year senior unsecured notes of USD400m and USD800m due 2015 and 2020, respectively, issued through its Hong Kong branch. The proceeds will be used for the bank's general corporate purposes.
The rating assigned to BBL's senior unsecured notes is at the bank's 'BBB+' Long-term foreign currency (LT FC) IDR, which is currently a notch above Thailand's foreign currency sovereign rating ('BBB'/Stable), and at the Country Ceiling. The bank's LT FC IDR is based on the bank's strong stand-alone financial position ('C' Individual Rating) and its ability to withstand a severe deterioration in the credit environment, including a moderate holding of government securities (13% of total assets at end-June 2010) and limited government ownership.
BBL's ratings reflect its strong domestic and regional franchise, resilient profitability, solid reserves and capital levels and strong deposit base, although Fitch notes that non performing loans (NPLs) remain higher than its regional peers. The Stable Outlook is based on the agency's expectation that BBL's performance should remain strong, despite a volatile economic and political environment. While corporate and SME lending remain BBL's core strengths, its retail loans are expected to grow in the medium-term. The bank also benefits from overseas loan exposure, providing a broader country and economic risk diversification.
The LT FC IDR and the note rating could be downgraded if there is a weakening in the bank's financial position or if there is a downgrade of the Country Ceiling. The Individual rating could be upgraded if there is a sustained improvement in the bank's profitability and asset quality, versus its regional peers, as well as the maintenance of the bank's strong capital and liquidity.
Asset quality appears stable, although special mention loans rose in H110 (2.6% of loans). NPLs, while declining, remain higher versus regional peers, at 4.7% of total loans at end-June 2010 given legacy NPLs from the 1997-1999 crisis; this risk is offset by the bank's high reserve coverage at 127.9% of NPLs.
Also, BBL has a strong liquidity position, helped by its solid deposit franchise, and from having 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, providing the bank a strong buffer to absorb a significant deterioration in operating conditions.
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 fell significantly after the 1997 financial crisis. The bank's ownership is now widely dispersed, with foreign (mainly institutional) shareholders holding about 49%. BBL has 968 domestic and 15 offshore branches, mainly in Asia, and subsidiaries in securities and fund management.