Bangkok--14 Jun--Fitch Ratings
Fitch Ratings has affirmed Bangkok Bank Public Company Limited’s (BBL) Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘BBB+’ with Stable Outlook. A full rating breakdown is provided below.
BBL’s ratings reflect sustained improvements in profitability, asset quality and reserves as well as its ability to preserve its strong capital and liquidity position. The bank’s ratings also take into account its solid deposit and business franchise. Fitch believes that BBL’s financial position is strong enough to absorb a severe credit stress.
The bank’s Long-Term Foreign-Currency IDR is at the Country Ceiling, one notch above the sovereign Foreign-Currency Long-term IDR, due to its strong standalone financial position, moderate holding of government securities and limited government ownership. There is little scope for an upgrade unless there is a further material improvement in financial performance and the Country Ceiling is also upgraded. Negative rating action may arise from a sustained increase in loan concentration, rapid growth increasing the potential for deterioration in asset quality or weakening liquidity profile, or an over-exposure to sovereign debt. However, Fitch views these as remote prospects, which is reflected in the Stable Outlook.
Given BBL’s size and systemic importance to the Thai financial sector and economy, Fitch believes that there is a high probability that the bank would receive state support, in case of need.
The bank reported solid financial performance in 2010 and Q111 due to strong loan growth, lower provision expenses and improved cost efficiency. For 2011, Fitch expects the bank’s strong performance to continue, supported by the bank’s corporate loan franchise and economic growth in Thailand. In addition, its large exposure to Asia relative to local peers means BBL stands to benefit from expected solid economic growth in the region.
Asset quality continues to improve. Non-performing loans and special mention loans both declined to 3.3% and 1.5% of total loans, respectively, due to BBL’s active loan management. Reserve coverage remains the strongest in the sector and among regional peers at 170% at end-March 2011, with a large general reserve pool available to absorb future credit risk. Fitch expects BBL’s asset quality to improve further due to its conservative credit culture, active loan management and stronger domestic economic growth.
BBL has a solid deposit franchise and liquidity position. The bank’s reliance on wholesale funding remains moderate, despite the issue of USD1.2bn senior notes in Q410 to support its foreign-currency funding needs. BBL’s capital remains solid with a Tier 1 ratio of 12.3% and an equity to assets ratio of 11.9% at end-March 2011. The quality of capital is high with no reliance on hybrid capital. Fitch expects the bank’s capital strength to be maintained given its conservative strategy for asset growth and moderate dividend payout.
BBL is the largest bank by asset among Thai banks with an 18% share of loans and a 20% share of deposits at end-2010. The bank was established in 1944 by the Sophonpanich family, whose stake has fallen significantly since the country’s 1997 financial crisis. BBL has a strong business franchise in large corporates and SMEs and continues to expand into retail lending.
BBL’s ratings are as follows:
Long-Term Foreign Currency IDR affirmed at ‘BBB+’; Outlook Stable
Short-Term Foreign Currency IDR affirmed at ‘F2’
Individual Rating affirmed at ‘C’
Support Rating affirmed at ‘2’
Support Rating Floor affirmed at ‘BBB-’
Long-term National Rating affirmed at ‘AA(tha)’; Outlook Stable
Short-term National Rating affirmed at ‘F1+(tha)’
Long-term foreign currency senior unsecured notes affirmed at ‘BBB+’
Long-term foreign currency subordinated debt affirmed at ‘BBB’; and
National Long-term subordinated debt affirmed at ‘AA-(tha)’