Bangkok--28 Nov--CIMB Thai Bank
CIMB Thai Bank reported that Fitch Ratings has affirmed CIMB Thai Bank Public Company Limited’s (CIMBT) Long-Term Foreign-Currency IDR at ‘BBB’ and its National Long-Term Rating at ‘AA-(tha)’. The Outlook is Stable.
CIMBT’s ratings are primarily driven by Fitch’s view that there is a high probability of support, if required, from its parent, CIMB Bank Berhad (CIMB; ‘BBB+’/Stable), the fifth-largest financial services group in Southeast Asia. CIMB has a 93.15% stake in CIMBT and plays a key role in the latter’s transformation programme and balance sheet clean-up. Also, CIMBT has aligned its strategy with CIMB’s regional franchise network, focusing on cross-border and cross-business opportunities. CIMB’s late-2010 THB3.0bn capital injection will support medium term growth and provides cushion against global and domestic market volatility.
Any changes in CIMB’s ability and/or propensity to support (including lowering its stake) could affect CIMBT’s Long-Term ratings. As this is not Fitch’s expectation, CIMBT’s Outlook is Stable, consistent with its parent’s.
The above improvements are reflected in the affirmation of CIMBT’s Viability Rating of ‘bb-’, which also takes into account the bank’s modest franchise and liquidity relative to higher-rated institutions in Thailand. A positive rating action is dependent on sustained strengthening of its franchise and liquidity, with further improvements in profitability, asset quality and capital. A negative rating action could stem from aggressive expansion if it compromises credit quality and its funding profile.
CIMBT’s core profitability has improved with net interest income (NII) increasing 5% yoy in 2010 and 10% yoy in 9M11, from solid loan growth (2010: 9% yoy; 9M11: 19.6% ytd), mainly on corporate loans and retail lending (residential mortgages loans and auto hire purchases). Despite high growth, Tier 1 and total capital ratios remain adequate at 8.1% and 13.8%, respectively, at end-September 2011, while liquidity remains reasonable with loan-to-deposit (included bills of exchange) at 88.5% at end-June 2011. CIMBT also has strong funding and capital commitment from CIMB, as well as its subscription of CIMBT’s upper- and lower-tier 2 instruments.
Nonetheless asset quality remains a key concern with a high level of impaired loans. Its NPL rose to THB3.8bn or 3.4% of total loans at end-September 2011 (end-2010: THB2.9bn or 3.1%) due to a deterioration in asset quality of certain corporate loans, while special mention loans remain high at 7.8% of total loans at end-June 2011 (end-2010: 9.3%). Fitch views that the major flooding in Thailand since September 2011 could weaken CIMBT’s delinquency rates over the next six months, which will increase provisioning risk and impact its profitability in 2012.
CIMBT's hybrid upper tier 2 debt rating is notched two levels below the bank's National Long-Term Rating. Despite coupon deferral mechanisms, Fitch believes CIMB would still support coupon payments. In the event CIMBT's capital adequacy ratio falls below 0%, or if Thailand's central bank intervenes, this would result in mandatory deferral. Fitch however considers the risk of this as low, in light of expectations of timely support from the parent. CIMBT’s lower tier 2 debt is rated one notch below the bank’s National Long-Term Rating, consistent with Fitch’s rating criteria.
CIMBT, formerly Bank Thai (BT), was formed in 1998 as a result of a government-initiated merger of several defunct financial institutions. It is one of the smallest banks in Thailand, with asset size and deposits share of 1.4% at end-June 2011.
CIMBT’s ratings:
- Long-Term Foreign Currency IDR affirmed at ‘BBB’; Outlook Stable;
- Short-Term Foreign Currency IDR affirmed at ‘F3’;
- Viability Rating affirmed at ‘bb-’;
- Individual Rating affirmed at ‘D’;
- Support Rating affirmed at ‘2’;
- National Long-term rating affirmed at ‘AA-(tha)’; Outlook Stable;
- National Short-term rating affirmed at ‘F1+(tha)’;
Upper tier 2 debt affirmed at ‘A(tha)’; and
Lower-tier 2 debt affirmed at ‘A+(tha)’.
About CIMB Thai Bank
CIMB Thai Bank is a commercial bank registered in Thailand with 155 branches nationwide. It provides a wide variety of financial products and services to corporate, SME and retail customers. It also offers stock broking service and financial advisory service to corporations, as well as mutual fund, asset management, insurance and other products and services via its existing branch network. Additional information can be found at www.cimbthai.com.
About CIMB Group
Headquartered in Kuala Lumpur, CIMB Group Holdings Berhad is the listed holding company for Malaysia's second largest financial services provider. As at 31 March 2011, CIMB Group was the second largest company on Bursa Malaysia with a market capitalisation of RM60.9 billion. CIMB Group's main markets are Malaysia, Indonesia, Singapore, Thailand and Cambodia. With over 38,000 employees in 14 countries, CIMB Group offers a full range of financial products and services covering consumer banking, corporate and investment banking, Islamic banking, asset management, wealth management, insurance and Takaful, and private banking through their retail network of over 1,100 branches in ASEAN. For more information, visit www.cimb.com