Bangkok--20 Dec--Fitch Ratings
Fitch Ratings says in a new report that the Outlook on major Thai banks is Stable despite the impact from the severe flooding and potential risk from a global economic slowdown. This is based on the agency’s expectation that the banks will remain resilient on the back of strong capital, improved reserve coverage and profitability.
Fitch expects the floods to result in GDP decline in Q411 due to business and spending disruption, although this is likely to be mitigated somewhat by a strong post-flood economic rebound. Risks over asset quality deterioration and provisioning as a result of the floods should be alleviated by The Bank of Thailand’s forebearance on flood-affected borrowers by six to 12 months. Downside risks to Fitch's view could stem from a delayed recovery process. In a severe stress scenario, banks with lower reserves could be more impacted.
Strong loan growth without a parallel expansion of the deposit base has led to a steady rise in the loans-to-deposits ratio and, consequently, growing funding and liquidity risks. Increased global financial market volatility could exacerbate such risks for Thai banks, particularly small to medium-sized banks. Excessive issuance of bills of exchange and over-reliance on foreign-currency wholesale may also lead Fitch to revise the Outlook to Negative.
The report, ‘2012 Outlook: Major Thai Banks’, is available on www.fitchratings.com or by clicking on the link above.