Bangkok--8 Nov--Fitch Ratings
Fitch Ratings has today affirmed Siam Commercial Bank Public Company Limited's (SCB) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB+' with a Stable Outlook and Individual Rating at 'C'. A complete list of all other ratings, all of which have also been affirmed, is included at the end of this release. SCB's ratings reflect its solid performance and its strong reserves and capital position which, in Fitch's opinion, could withstand a severe deterioration in the credit environment. Fitch expects SCB to maintain its strong profitability, supported by its well-established universal banking platform, despite the volatile domestic economic environment. Many of the bank's key metrics compare quite favourably with similarly rated institutions globally.
SCB's impaired loans have steadily declined since 2007, helped by NPL sales, although special mention loans (SMLs) increased notably at end-2008 to THB30bn, or 3.3% of total loans (end-2007: THB15bn and 1.7%, respectively) given a few large troubled corporate exposures. With the domestic economic recovery in 2010 and an active NPL workouts, NPLs declined to THB44bn (4.5% of total loans) at end-September 2010 (end-2009: THB45bn; 4.8%), while SMLs stabilised at THB31bn. Fitch notes that the majority of impaired loans are a legacy from the Asia crisis period and that new NPL formations are quite low. Nevertheless, the agency anticipates them falling further as the economic outlook improves.
SCB's funding and liquidity position is good, supported by its large retail deposit franchise, with loan-to-deposit ratio at 95% (including bills of exchange) at end-September 2010. The bank's capital position also remains very strong with Tier 1 ratio of 12.7% and total capital ratio of 16.8% at end-September 2010. Meanwhile, its equity/assets ratio was at 11.0% at end-September 2010.
Given SCB's size and systemic importance to the Thai financial sector and economy, Fitch believes there is a high probability the bank would receive state support, should the need arise, although given its resilience under Fitch's stress testing, the agency believes such a need would be unlikely. The bank's Long-Term foreign currency IDR is rated at the Country Ceiling and is one notch above the sovereign's foreign currency IDR ('BBB'). The bank's Long-term foreign currency IDR is based on its strong standalone financial position which could enable it to absorb a severe deterioration in the credit environment and a moderate holding of government securities (10% of total assets), as well as on limited government ownership. A material weakening in the bank's financial position or a downgrade of the Country Ceiling could lead to a downgrade of its Long-term foreign currency IDR. The bank's Individual Rating could be upgraded if there is a sustained improvement in the bank's profitability and asset quality, to a level comparable to its regional peers, as well as the maintenance of strong capital. The debt ratings are consistent with relevant criteria and Fitch's standard practice for rating such instruments which are performing.
SCB, established under the Royal Charter in 1904, is Thailand's oldest and fourth-largest bank, with a 15% market share of loans and 14% share of deposits at end-June 2010. The Crown Property Bureau is the largest private shareholder with a 24% stake. Although the Ministry of Finance (MoF) indirectly holds 23% of SCB through the Vayupak Fund, it has limited board representation and is not involved in the management of the bank. SCB has leading affiliates in securities, fund management and insurance.
SCB's ratings have been affirmed as follows:
- Long-term foreign currency Issuer Default Rating (IDR) at 'BBB+'; Stable Outlook
- Short-term foreign currency IDR at 'F2';
- Individual Rating at 'C';
- Support Rating at '2';
- Support Rating Floor at 'BBB-';
- Long-term National Rating at 'AA(tha)'; Stable Outlook;
- Short-term National Rating at 'F1+(tha)';
- Long-term foreign currency senior unsecured debt at 'BBB+';
- Long-term foreign currency subordinated debt at 'BBB';
- Long-term National subordinated debt at 'AA-(tha)';
- Short-term National senior unsecured debt at 'F1+(tha); and
- Short-term National commercial paper at 'F1+(tha)'
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
Committee Chairperson
Jonathan Cornish
Managing Director
+852 2263 9901
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email:
[email protected].