Bangkok--8 Dec--Fitch Ratings
Fitch Ratings has affirmed Export-Import Bank of Thailand's (EXIM) Long-Term Foreign Currency Issuer Default Rating (LT FC IDR) at 'BBB' and National Long-Term Rating at 'AAA(tha)'. The Outlook is Stable. A full rating breakdown is provided below. EXIM's ratings strongly correlate with those of Thailand's sovereign ratings due to EXIM's full ownership and control by the Ministry of Finance (MOF), partial debt guarantee by the government, and EXIM's policy role as Thailand's principal export credit agency.
Based on the strong correlation, the bank's Support Rating Floor is at the sovereign LT FC IDR of 'BBB'. A change in the sovereign FC IDR would thus result in the same movement of EXIM's LT FC IDR and Support Rating Floor. EXIM's Support Rating is driven by the sovereign FC IDR; an upgrade of Thailand's FC IDR to the 'A' category would allow the Support Rating to be upgraded. However, an upgrade of Thailand's Local Currency IDR would not affect the bank's Long-Term National Rating which is currently at the highest level on the rating scale.
EXIM reported improved financial performance in H111, supported by improved profitability and asset quality. Annualised return on average assets (ROAA) in H111 rose to a record 0.9% (2010: 0.2%), while net interest margin rose to 2.5% (2010: 2.3%). However, Thailand's export-driven economy and, in turn, EXIM's performance are exposed to rising global risks. Moreover, profitability could be impacted by lower revenue on the back of flood-relief financial schemes offered to affected export SMEs as well as by an expected increase in provision expense.
EXIM's asset quality has gradually improved due to active loan restructuring and write- offs, although the quality remains weaker than other export credit agencies in the region. The impact from the floods could result in a small and short-term increase in non-performing loans and provisioning due to its moderate exposure to the affected SMEs.
EXIM's capital has weakened in the last two to three years, due mainly to a significant increase in export credit insurance volume, but remains stronger than regional peers'. The Tier 1 capital ratio was at 13.6% at end-June 2011 (end-2009: 19.8%). Equity/assets also declined to 21.6% from 21.9% at end-2010.
As the bank is not allowed to accept retail deposits, wholesale funding and borrowings make up most of its funding base. Nonetheless, funding risk is mitigated by its quasi-sovereign status that allows the bank to access central bank resources for liquidity and rely on a government guarantee, if necessary.
The following ratings of EXIM's ratings have been affirmed:
- Long-Term Foreign Currency IDR at 'BBB'; Outlook Stable
- Short-Term Foreign Currency IDR at 'F3'
- Support Rating at '2'
- Support Rating Floor at 'BBB'
- Long-Term National Rating at 'AAA(tha)'; Outlook Stable
- Short-Term National Rating at 'F1+(tha)'
- National Long-term senior unsecured debt at 'AAA(tha)'