กรุงเทพฯ--23 พ.ย.--Fitch Ratings
Fitch Ratings (Thailand) has today assigned an ‘A-(tha)’ National Long-term rating to TISCO Bank Public Company Limited’s (TISCOB) subordinated and unsecured debentures of up to THB1bn due 2020. The proceeds will be used to strengthen the bank’s capital base.
The ‘A-(tha)’ rating for the subordinated debentures is one notch below TISCOB’s ‘A(tha)’ National Long-term rating, which is consistent with Fitch’s practice for rating such instruments that have no loss absorption features. The bank’s rating takes into consideration its strong profitability and asset quality as well as the expected maintenance of current capital level, although it has a weaker funding and liquidity position compared to larger peers.
In H110, TISCOB’s net profit grew 50% to THB1.1bn, due mainly to strong loan growth (13% yoy) and lower funding costs. Its net interest margin (NIM) widened to 5% in 6M10 (2009: 4.5%), while return on assets (ROA) and return on equity (ROE) improved to 1.6% and 18.1% in H110, respectively. Fitch expects TISCOB’s performance in 2010 to remain strong, in line with its 6M10 performance, and could remain strong in 2011 given an improving domestic economic outlook.
TISCOB’s NPLs continued to decline to THB2.3bn or 1.9% of total loans at end-June 2010 (end-2009: THB2.5bn or 2.3% of total loans). The bank’s loan loss reserves rose to THB2.8bn or 122.3% of impaired loans at end-June 2010 (end-2009: THB2.1bn or 84.8% of impaired loans) as it continues to maintain high provisioning level to buffer against downside risks. TISCOB’s funding and liquidity remained stable, although weaker compared with larger peers. The bank’s loans/deposits ratio appeared very high at 185% at end-June 2010, although the ratio would decline to a more moderate level of about 109%, if bills of exchange, generally viewed as an alternative instrument for depositors, are included.
The bank’s equity/assets ratio has declined significantly since 2005 to 8.9% at end-June 2010 (end-2005: 18%), due mainly to strong loan growth and high dividend payouts, though its Tier 1 capital and total capital remained strong at 13.5% and 16.6% at- end-June 2010, respectively. A further significant decline in the equity/assets ratio could affect the bank’s ratings.
TISCOB was established in 1969 as a finance company and changed its status to that of a commercial bank in July 2005. Following the group’s restructuring in December 2008, TISCOB is now a major subsidiary of TISCO Financial Group Public Company Limited (TISCOFG), and has a strong niche position in the car hire purchase business.
Disclosure: TISCO Asset Management Company Limited (of which TISCO Financial Group Public Company Limited holds 100%) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operation of, or credit rating reviews undertaken by, Fitch Ratings (Thailand) Limited.