Bangkok--3 Dec--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed TISCO Bank Public Company Limited’s (TISCOB) National Long-term rating at ‘A(tha)’ with a Stable Outlook and TISCO Financial Group Public Company Limited’s (TISCO) Long-term rating at ‘A-(tha)’ with a Stable Outlook. The agency has affirmed all other ratings of both entities, and a complete list is included at the end of this release.
TISCOB’s ratings take into consideration its strong profitability and asset quality, as well as the expected maintenance of its current capital level. The ratings are constrained by its weaker funding and liquidity position compared to larger peers. TISCO’s ratings reflect its holding company status, which is structurally subordinated to its banking subsidiary, TISCOB, as the former will have to rely mainly on dividend payments from TISCOB.
The Stable Outlook on TISCOB’s ratings is based on expected sustained strong overall financial performance. The Stable Outlook for TISCO, meanwhile, is based on the expected maintenance of leverage and liquidity at the holding and group level. Major changes to TISCO’s investment, leverage and business strategy as well as movements in TISCOB’s ratings could affect the holding company’s ratings.
In H110 TISCOB’s net profit grew 50% to THB1.1bn, while its net interest margin widened to 5% (2009: 4.5%), driven by strong loan growth (13% yoy) and lower funding costs. Fitch expects TISCOB’s performance in H210 to remain strong, although higher competition and rising funding costs could see profitability decline in the medium term. TISCOB’s asset quality remains strong with impaired loans falling to THB2.3bn or 1.9% of total loans at end-June 2010 (end-2009: THB2.5bn or 2.3% of total loans), the lowest in the banking sector.
TISCOB’s funding and liquidity remained stable, although its reliance on large depositors (deposits of over THB10m), which account for about 72% of total deposits (including bills of exchange; B/E), could make it more vulnerable during periods of systemic stress. Its liquidity indicator has also weakened with liquid assets/deposit and short-term funding falling to 11% at end-June 2010 (end-2009: 14%), versus the average of about 25% for major banks. The bank’s Tier 1 capital and total capital is still relatively strong at 13.5% and 16.6% at end-June 2010, respectively. While declining over the past few years, its equity/assets ratio is still strong at about 9% at end-June 2010. Fitch expects the bank to maintain a higher capital level, versus its peers, given its auto-finance concentration and greater vulnerability to systemic shocks as a smaller bank. A further significant decline in the equity/assets ratio could affect the bank’s ratings.
The holding company, TISCO, reported a lower unconsolidated net profit of THB196m in 9M10 (9M09: THB1.7bn), mainly as a result of the absence of interim dividend payments from TISCOB. TISCO’s borrowings stood at THB3.4bn at end-September 2010, which consisted of short-term BE.
TISCO appears to have a wide asset/liability maturity gap and low level of liquid assets, although the liquidity risk is mitigated by TISCOB’s credit line of THB3.8bn, and generally high roll-over rate of its short-term borrowings; TISCOB will continue to be the main provider of liquidity to the holding company. TISCO’s existing leverage ratio still appears modest, with a debt to equity ratio of about 0.3x and its double leverage ratio appears acceptable at 109%. TISCO’s and TISCOB’s dividend payout policy is at a minimum of 50%, about the same level paid in 2008 and 2009.
TISCO is TISCOB’s group holding company. Set up in 2008, it holds a 99.5% stake in TISCOB and 100% stakes in its securities, asset management and leasing subsidiaries. TISCOB was established in 1969 as a finance company and changed its status to that of a commercial bank in July 2005. It has a strong niche position in the car-hire-purchase business.
TISCOB’s ratings have been affirmed as follow:
- National Long-term ratings at ‘A(tha)’ with Stable Outlook;
- National Short-term ratings at ‘F1(tha)’;
- National Long-term senior unsecured debts at ‘A(tha)’; and
- National Long-Term subordinated unsecured debts at ‘A-(tha)’
TISCO’s ratings have been affirmed as follow:
- National Long-term ratings at ‘A-(tha)’ with Stable Outlook; and
- National Short-term ratings at ‘F2(tha)’.