Bangkok--6 Jun--Fitch Ratings
Fitch Ratings has affirmed the ratings of Thailand's three largest private commercial banks, Bangkok Bank Public Company Limited (BBL), Siam Commercial Bank Public Company Limited (SCB), and Kasikornbank Public Company Limited (KBANK).
Their Long-Term Foreign Currency Issuer Default Ratings (IDR) have been affirmed at 'BBB+' and National Long-Term Rating at 'AA(tha)'. The Outlook is Stable. A full rating breakdown is provided below.
Their IDRs are all driven by their Viability Ratings (VR), which in turn are underpinned by sound capital and profitability, strengthened asset quality and reserves and their strong domestic franchises. Fitch believes the three banks' overall financial position is sufficiently robust to absorb considerable credit stress. This is reflected in their Stable Outlook.
An upgrade of National Long-Term Rating may result from sustained significant improvements in profitability and asset quality, while maintaining strong levels of capital. However, this is unlikely in the near term, given the rising risk of a weakening operating environment. Conversely, a downgrade of the VRs and IDRs may result from a sustained increase in loan concentration or rapid growth leading to material deterioration in asset quality or a weaker liquidity profile. A downgrade of Thailand's Country Ceiling ('BBB+') may also lead to a downgrade of the banks' IDRs as they are constrained by the Country Ceiling. The banks' moderate holding of government securities and immaterial government ownership allow them to be rated above the sovereign's Long-Term Foreign Currency IDRs but not above the Country Ceiling.
In the medium term, the performance of the three banks is expected to remain strong compared with the domestic banking industry, supported by their strong domestic franchise, lower funding costs and improving fee-generating capacity.
Overall, their asset quality should remain resilient, absent any major economic shocks from the European debt crisis. Impaired loans were below 3% at end-March 2012, but could temporarily weaken in the next six months due to the impact of the Thai floods and a potentially volatile global economy.
The banks' funding focuses on retail deposits with limited reliance on wholesale and foreign-currency funding. This should mitigate liquidity and funding risks in a volatile environment. Capital levels are expected to remain sufficiently robust with a Tier 1 capital ratio above 9%-10% in the long-term which, together with well-built reserves, should be adequate to absorb potential credit losses if the operating environment weakens. Loan loss reserves coverage was 193% for BBL and about 130% each for SCB and KBANK at end-March 2012.
BBL is Thailand's largest commercial bank by consolidated assets and has the greatest regional footprint among Thai banks. SCB, established under a Royal Charter in 1904, is Thailand's oldest and third-largest universal bank. The Crown Property Bureau is the largest private shareholder with a 24% stake, while the Ministry of Finance indirectly holds 23% of SCB through the Vayupak Fund. KBANK was established by the Lamsam family and is Thailand's fourth-largest commercial bank.