Bangkok--23 Jul--Fitch Ratings
Fitch Ratings (Thailand) published Kasikorn Securities Public Company Limited (KS) National Long- and Short-Term Ratings of ‘AA-(tha)’ and ‘F1+(tha)’, respectively. The Outlook is Stable.
KS’s ratings reflect the full ownership, control and strong support from its parent, Kasikornbank Public Company Limited (KBank, ‘AA(tha)’/Stable), Thailand’s fourth-largest bank. KS is also fully integrated with its parent through the alignment of strategy and risk management policy as well as through close name association. The parent also provides operational support, such as risk management, sharing of resources and client referrals, as well as financial support through various types of credit lines.
KS is rated one notch below KBank’s to reflect Fitch’s view of potential weakening of support from KBank if the bank were to face severe financial stress, given KS’s limited profit contribution and its small size relative to the group. The one-notch differential also reflects KS’s need to continuously rely on funding and business support from KBank.
KS’s ratings should move in line with KBank’s ratings, based on expectation of support. Therefore, any change in KBank’s ratings should also affect KS’s ratings. A reduction in KBank’s shareholding in and a change in propensity of support for KS could result in a wider notching differential, while a material increase in size as well as revenue and profit contribution could result in a narrower notching; However, Fitch views these as remote prospects in the medium- to long-term.
KS’s performance has been steadily improving since its inception in 2005, driven mainly by improving market share as well as growing brokerage volume. In 2011, KS reported a solid net profit of THB356m and returns on assets and equity of 10.4% and 25%, respectively. The company should continue to report reasonable profitability in the medium-term, supported by further expansion of market share as KS continues to leverage off KBank’s client base and network. In addition, KS also expects to benefit from its alliance with Macquarie Securities (Thailand) (MACQ) through increasing business cooperation and sharing of resources and network.
Fitch views that KS’s funding and liquidity risks remain low as it had no outstanding debt at end-2011, and also because KBank has provided credit facilities. Fitch expects KS’s capital to remain strong. The steadily improving profitability and a zero dividend policy have helped shore up the company’s total equity to THB1.6bn or 64.5% of total assets at end-2011.
KS was established in 2005 and is a wholly-owned subsidiary of KBank. After the completion of strategic alliance agreement in February 2012 both KS’s and MACQ’s combined market share was the fourth-largest at 5.6% as of end-June 2012.