Bangkok--9 Dec--Fitch Ratings
Fitch Ratings has today affirmed Export-Import Bank of Thailand’s (EXIM) Long-term foreign currency Issuer Default Rating (IDR) at ‘BBB’, Short-term foreign currency IDR at ‘F3’, National Long-term rating at ‘AAA(tha)’, National Short-term rating at ‘F1+(tha)’, senior unsecured debt at ‘AAA(tha)’, Support Rating at ‘2’ and Support Rating Floor at ‘BBB’. The Outlook is Stable.
The bank’s ratings correlate with the sovereign ratings given the full ownership and control by the Ministry of Finance (MOF), partial debt guarantee provisions and its policy role as Thailand’s principal export credit agency. Under the EXIM Act the MOF is required to compensate the bank for losses incurred as a result of undertaking business in accordance with its mandated policy role, or for losses arising from export credit insurance and investment insurance. Fitch believes that there is a high probability that state support would be forthcoming, if necessary.
An upgrade or a downgrade of the sovereign rating would result in the same movement of EXIM’s Long-term foreign currency IDR. Also, the bank’s Support Rating is constrained by the sovereign’s Long-term foreign currency IDR, while the Support Rating Floor is at the sovereign’s Long-term foreign currency IDR.
EXIM’s performance has been improving, with reported net profit of THB346m in 2009, 72% higher yoy, due mainly to lower loan loss provisions (LLPs). For the nine-month period to end-September 2010 (9M10), net profit rose 90% yoy to THB304m from lower cost of funds. Its ROA of 0.63% in 9M10 is in line with other regional export agencies.
At end-2009, NPLs declined steadily to THB4.4bn (8.2% of total loans) from THB4.7bn (9.2%) at end-2008 due to proactive NPL prevention programmes, as well as writeoffs/writedowns of NPLs; at end-September 2010, NPLs fell further to THB4.2bn (8.2%). Loan loss reserves (LLRs) totalled THB2.7bn, or about 64% of NPLs, implying additional provisioning risks depending on collateral and loan recoveries. EXIM also increased lending to fund and to guarantee offshore investments, which could raise its risk profile in the medium-term.
EXIM relies more on wholesale funding as it is not allowed to accept retail deposits, which means it is generally more vulnerable to funding risk during credit market volatility. Nonetheless, its ability to issue THB EXIM bonds with implicit guarantees and to tap financial resources from government budgets in times of need help mitigate funding risk.
EXIM’s capital position remains strong - Tier 1 ratio and total capital ratio were 17.1% and 18.4%, respectively, at end-September 2010 (end-2009: 19.8% and 21.0%). The equity-to-asset ratio rose to 23.7% at end-September 2010 (end-2009: 22.7%). In 2009, EXIM received an MOF capital injection of THB5bn.
EXIM began operations in 1994. It is under the supervision of the MOF and is subject to examination by the Bank of Thailand (BOT). The bank’s main objectives are to promote exports, Thai investments abroad and investments for national development.