Bangkok--28 Apr--Fitch Ratings
Fitch Ratings has today assigned a National Short-Term rating of 'F1+(tha)' to Siam Commercial Bank Public Company Limited's (SCB) unsubordinated unsecured revolving debenture programme of up to THB50bn, with a maturity not exceeding 270 days to be released in several tranches over a period of 12 months after the document's filing. The proceeds will be used for the bank's general corporate purposes. The bank's National Long-Term rating is 'AA(tha)' with a Stable Outlook
SCB's ratings reflect its solid overall performance, as well as its adequate liquidity and strong capital position which, in Fitch's opinion, could help withstand a severe deterioration in the credit environment. SCB has a leading domestic deposit and loan franchise, with one of the strongest retail banking accounting for 38% of its total loans. The bank's financial group also covers asset management and securities businesses. SCB announced in March 2011 that it increased its stake in Siam Commercial New York Life Insurance (SCNYL) to 94.6% from 47.3%, which further strengthens the bank's insurance businesses which cover life as well as property.
Despite Thailand's political turmoil during the past four years, SCB continues to report a solid performance with net profit (including minority interests) of THB24.3bn in 2010, up 16.7% yoy, backed by higher interest revenue and fee income and lower loan provisioning. In Q111, SCB's net profit increased sharply by 104.4%yoy to THB13.1bn, due largely to one-time investment gain as a result of SCNYL's acquisition. Excluding a one-time investment gain, net profit remains strong at THB8.0bn in Q111 or an increase of 25% yoy, as a result of sharp loan growth (up 20% yoy) and higher fee income stemming from the consolidation of SCNYL. Its net interest margins (including deposit insurance costs) declined slightly to 3.3% in Q111 from 3.4% in Q110 due to higher funding costs on the back of a rising interest rate trend. Normalised profitability metrics measured by return on average assets (ROAA) and return on average equity (ROAE) increased to 2.0% and 18.7% at end-March 2011 (at end-2010: 1.8% and 16.2%, respectively).
SCB's impaired loans continued to decline to THB38.3bn (3.4% of total loans) at end-March 2011 from THB38.8bn (3.7%) at end-2010 and THB44.8bn (4.8%) at end-2009, helped by non-performing loan (NPL) sales and low new NPL formation. Special mention loans (SMLs) sharply declined to THB15.0bn (1.3% of total loans) at end-March 2011 from THB29.3bn (2.8%) at end-2010 and THB32.6bn (3.5%) at end-2009, thanks to the bank's pre-emptive strategy to tackle with problem loans and improved loan repayments in light of the economic recovery since Q410. With declining NPLs, SCB's loan-loss coverage strengthened to 110.5% at end-March 2011 from 107.3% at end-2010 and 95.7% at end-2009.
SCB's liquidity position is adequate, supported by its large retail deposit franchise. Including the bills of exchange issued by the bank, loan-to-deposit ratio (LDR) was 95.2% at end-March 2011 (end-2010; 93.3%). Despite strong asset growth, the bank's capital position remains strong compared to similarly rated institutions, with Tier 1 ratio of 11.6% and total capital ratio of 15.5% at end-2010 (end-2009; 12.3% and 16.5%, respectively). Meanwhile, SCB's acquisition of SCNYL in Q111 will result in a net reduction in its capital adequacy ratio of about 0.5%.
SCB, established under the Royal Charter in 1904, is Thailand's oldest and fourth-largest bank, with a 15% market share of loans and 16% share of deposits at end-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.