Bangkok--16 Dec--Fitch Ratings
Fitch Ratings (Thailand) has today upgraded Siam Commercial Leasing Public Company Limited’s (SCBL) National Long-term rating to ‘A+(tha)’ from ‘A(tha)’ and National Short-term rating to ‘F1+(tha)’ from ‘F1(tha)’. The Outlook is Stable.
SCBL’s ratings upgrades reflect stronger operational integration between SCBL and its parent, Siam Commercial Bank Public Company Limited (SCB; ‘AA(tha)’/Stable/‘F1+(tha)’), which allows for closer notching differential. SCBL transferred new origination of its retail hire purchase business to SCB in Q208, and now focuses on the servicer business for over 60 days plus delinquent receivables for SCB, and SCBL’s remaining auto hire purchase portfolio. Fitch notes that SCBL’s cash flow management is now controlled by SCB, with the latter providing support in other forms (through the IT system, accounting system, human resource and audit & compliance).
As SCBL’s National ratings are based on SCB remaining the controlling shareholder, any change in the latter’s shareholding and its support policies could affect the notching differential. Also, a change in SCB’s ratings could affect SCBL’s ratings.
SCBL’s overall performance remained strong in H110, despite its run-off of its hire purchase portfolio. SCBL’s hire purchase account receivables declined to THB26bn at end-H110 (end-2009: THB35bn; end-2008: THB59bn). SCBL’s net profit improved 11% yoy to THB627.4m in H110 due largely to a decline in loan provisioning. SCBL’s net interest margins increased to 7.1% in H110 (H109: 5.0%) due to a fall in funding costs. Profitability measures remained relatively strong, with ROA and ROE of 3.8% and 11.6%, respectively, in H110.
SCBL’s non-performing receivables (including terminated contracts of hire purchase (TMN) accounts) declined to THB1.6bn at end-6M10 (or 4.7% of total loans) from THB2.0bn at end-2009 (3.6% of total) and THB2.8bn at end-2008 (3.6% of total). Reserve coverage appears moderate at 59% at end-6M10, although recoveries have typically been more than 50%.
Funding and liquidity risks are mitigated by strong support from SCB, with short-term loans of up to THB17.0bn from its parent (outstanding THB15.4bn at end-6M10). SCBL’s capital remains very strong, despite a large dividend payout in H110. Its equity to assets ratios rose to 38% at end-9M10 (end-2009: 29%) due to a declining asset base.
SCBL was established in 1976 to provide auto hire purchase financing. During 2006-2007, SCB increased its holding in SCBL to 99% (from 22%) as part of its strategy to strengthen its retail banking franchise. SCB is Thailand’s fourth-largest bank and one of its strongest banks.
Contacts:
Primary Analyst
Wasant Polcharoen
Director
+662 655 4758;
Fitch Ratings (Thailand) Limited
55 Wireless Road
Lumpini, Patumwan
Bangkok 10330
Secondary Analyst
Vincent Milton