Bangkok--20 Oct--Fitch Ratings
Fitch Ratings has affirmed Standard Chartered Bank (Thai) Public Company Limited’s (SCBT) Long-term Foreign Currency Issuer Default Rating (IDR) at ‘BBB+’ and National Long-Term Rating at ‘AAA(tha)’. The Outlook is Stable. A full rating breakdown is provided below.
SCBT’s International, National and Support Ratings are based on Standard Chartered Bank’s (SC; ‘AA-’/Stable) ownership and support. SC’s 99.9% stake is intended as a long-term strategic holding and the group exercises effective control of the SCBT board and management. Given SC’s reputation and resources, Fitch believes that there would be a high probability of shareholder support, if required. As such, a change in SC’s shareholding or propensity to support could impact SCBT’s ratings, as could a change in the parent’s ratings.
As SCBT’s Foreign Currency IDR is capped by the Country Ceiling, a change in Thailand’s Country Ceiling could also affect SCBT’s Foreign Currency IDR. Meanwhile, the current Viability Rating remains somewhat constrained by the bank’s high level of government exposure. A material increase in SCBT’s risk appetite indicated by excessive loan growth or significant concentration in certain exposures and/or deterioration in its franchise strength would most likely negatively affect its Viability Rating.
SCBT’s overall performance strengthened in H111 with net profit and return on assets (ROA) rising to THB1.9bn and 1.3%, respectively, (H110: THB1.6bn and 1.2%). This was mainly due to higher loans volumes (up 13% YoY), supported by favorable economic conditions. Net interest margins (NIM) also widened further to 3.1% (2010: 2.9%), partially reflecting a rebound in higher-yielding unsecured consumer loans.
Over the long-term, Fitch expects SCBT to maintain its strong franchise for its wholesale banking business, supported by SC’s strong regional franchise and expertise. However, SCBT’s corporate lending is likely to face increasing competition from major Thai banks, which could constrain its loan growth. Unsecured consumer lending is expected to increase moderately over the next two to three years, according to the bank’s strategy to rebalance the retail book between secured and unsecured loans. Although this should help support profitability and margins, the bank could face provisioning risks during an economic slowdown.
SCBT’s asset quality also improved with impaired loans remaining low at THB1.7bn or 1.7% of total loans at end-June 2011, reflecting reduced exposures in unsecured lending and generally supportive economic condition. The bank’s loan loss reserve coverage ratio remained high at 201.3% at end-June 2011 and should provide solid buffer against provisioning risk. Although asset quality risk could heighten due to global economic slowdown, Fitch believes this should be mitigated by SCBT’s improving collateral coverage, strong capital and rebalanced retail loan portfolio.
The bank’s low loan to deposit ratio (including bills of exchange) of nearly 80% and its holding of high quality liquid assets, mainly government securities, (accounting for 38% of total deposits), should help mitigate liquidity risk. Fitch gains further comfort from the bank’s ability to source funding from within the group and notes the availability of liquidity lines from SC. SCBT’s Tier 1 and total capital ratio remained solid at 16% at end-June 2011.
SCBT was initially founded in 1933 by the Wanglee family under the name Nakornthon Bank (NTB). NTB was nationalised as a result of the 1997 financial crisis and was later acquired by SC. SCBT currently ranks as the eighth largest Thai commercial bank with a market share of less than 2%.
SCBT’s ratings have been affirmed as follows:
- Long-Term Foreign Currency IDR at ‘BBB+’; Stable Outlook
- Short-Term Foreign Currency IDR at ‘F2’
- Long-Term Local Currency IDR at ‘A’; Stable Outlook
- Short-Term Local Currency IDR at ‘F1’
- Viability Rating at ‘bbb+’
- Individual Rating at ‘B/C’
- Support Rating at ‘2’
- National Long-term Rating at ‘AAA(tha)’; Stable Outlook
- National Short-term Rating at ‘F1+(tha)’
- National short-term unsecured and unsubordinated debenture programme at ‘F1+(tha)’
Contact:
Primary Analyst
Patchara Sarayudh
Associate Director
+662 655 4761
Fitch Ratings (Thailand) Limited
55 Wireless Road
Lumpini, Patumwan
Bangkok 10330
Secondary Analyst
Wasant Polcharoen
Director
+662 655 4758
Committee Chairperson
Jonathan Cornish
Managing Director
+852 2263 9901