Fitch Ratings has affirmed SCB X Public Company Limited's (SCBX) and The Siam Commercial Bank Public Company Limited's (SCB) Long-Term Issuer Default Ratings (IDRs) at 'BBB' and National Long-Term Ratings at 'AA+(tha)'. The Outlook is Stable.
Fitch has also affirmed both entities' Viability Ratings (VRs) at 'bbb', while SCB's and SCBX's Government Support Ratings (GSRs) have been affirmed at 'bbb' and 'bbb-', respectively.
Key Rating Drivers
SCB Underpinned by VR and GSR: SCB's Long-Term IDR and National Long-Term Rating are underpinned by both the bank's standalone credit profile, as reflected in its VR, and the GSR. SCB's Short-Term IDR is at the higher option of 'F2', to reflect the likelihood of government support being more certain in the near term.
Group VR Approach: SCBX is the group's holding company and SCB is the main bank subsidiary that dominates the group's financial profile, accounting for about 95% of group assets. SCBX's VR is equalised with the group's consolidated VR and the VR of SCB of 'bbb', reflecting Fitch's expectation that the holding company will maintain its common-equity double leverage ratio below 120%.
SCBX's VR drives the holding company's Long-Term IDR and National Long-Term Rating. SCBX's Short-Term IDR is at 'F3' as the group's funding and liquidity score is not sufficient for the higher option.
Weak Sector Prospects: Thailand's economic growth looks likely to remain weak in 2025, as global uncertainties affect the country's relatively open economy. This will limit prospects for banks' growth and performance. We apply a positive adjustment to arrive at 'bbb' for Thailand's assigned operating environment score, as we believe the Thai sovereign (BBB+/Stable) actively contributes to stable financial markets, such as through regulatory and fiscal measures during the Covid-19 pandemic.
Strong Market Positions: SCB is one of the largest commercial banks in Thailand, with a deposit market share of 14%, as well as a diverse client base and strong brand recognition. The group has broad product range, with a particularly strong market position in retail banking, which supports cross-selling and earnings generation. However, we consider the operating environment to be an increasing constraint on the through-the-cycle performance of Thai banks. As a result, we revised down SCBX's business profile score to 'bbb' from 'bbb+'.
Pressures on Risk Profile: Fitch has revised the outlook on the group's risk profile score to negative from stable as we believe that previously anticipated improvements in key asset quality metrics may not materialise. Credit quality pressures may remain significant over the next two years, which could lead to continued risk management challenges.
Asset Quality Downside Remains: Fitch has revised the outlook on the group's asset quality score to negative from stable due to reduced headroom and persisting pressure on NPL formation. SCBX's impaired loan ratio was steady at 4.0% in 1Q25 (unchanged from end-2024 and end-2023), which remains higher than that of large domestic peers. The asset quality score of 'bbb-' is above the implied score due to the bank's loan loss allowance coverage, although it remains below the sector average (SCBX: 150% in 1Q25; sector average 173%).
Profitability To Decline Slightly: Fitch expects some earnings pressure over the next two years due to narrower margins, while credit costs could remain elevated given asset quality risks. Nonetheless, SCBX benefited from a strong profit recovery with operating profit/risk-weighted assets (OP/RWA) rising to 2.7% in 1Q25 (2024: 2.4%). Even with upcoming challenges, we expect OP/RWA to remain above 2%, and well-positioned for the current assigned score of 'bbb-'.
Strong Capitalisation: SCBX's capitalisation score of 'bbb+' reflects its sustained solid capital buffers. The common equity Tier 1 (CET1) ratio was 17.6% at end-1Q25 (sector average: 17.0%) and has been broadly steady since 2021. Fitch expects SCBX's capitalisation to remain sound, supported by adequate earnings and a slow growth outlook over the next two years.
Generally Stable Liquidity Prospects: We estimate SCBX's loan/deposit ratio to remain little changed (1Q25: 99.2%, 2024: 98.2%) over the next two to three years. The group's funding and liquidity profile score is supported by SCB's robust domestic deposit franchise, and its high portion of current and savings accounts (77% of total deposits), which provide stable and low-cost funding.
GSR Reflects Systemic Importance: SCBX's and SCB's GSRs are based on the group's size and importance to the Thai financial system. SCB is one of the four largest commercial banks in Thailand, with a sound and sustainable market presence. It has been named a domestic systemically important bank (D-SIB) by the central bank. SCBX's GSR of 'bbb-' is one notch lower than that of SCB, reflecting Fitch's view that the government may have a higher propensity to support SCB due to its depository function.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
IDRs and National Ratings
SCBX
SCBX's Long-Term IDR and National Long-Term Rating are sensitive to any deterioration in the group's VR. A downgrade in the group's VR would trigger a similar action on SCBX's Long-Term IDR and National Long-Term Rating.
Any assessment of the National Ratings would also consider SCBX's credit profile relative to the national rating universe in Thailand.
SCBX's Short-Term IDR could be downgraded to 'B' if its Long-Term IDR falls below 'BBB-'. The National Short-Term Rating could be downgraded if the National Long-Term Rating drops below 'AA-(tha)'.
SCB
Negative rating action on both SCB's GSR and VR would lead to similar action on the bank's IDRs and National Long-Term Rating.
SCB's National Long-Term Rating could also be downgraded to 'AA(tha)' if, in Fitch's opinion, its credit profile weakens relative to the national-rating universe of rated entities in Thailand.
Viability Rating
SCBX and SCB
SCBX's and SCB's VRs could be downgraded if a significantly weaker-than-expected economic environment prompts negative sovereign rating action, which could also lead to a re-assessment of the banks' operating environment score as well as other VR factors such as the group's business profile and risk profile.
Alternatively, there could be negative rating action on the VRs if the group's consolidated financial position deteriorates and there are multiple downgrades of factor scores. This may, for example, arise from reduced capital buffers, or from weaker earnings performance that affects the bank's ability to build adequate loss absorption buffers. Such stresses may be indicated by the four-year average OP/RWA ratio falling to below 1.5% (currently around 2.2%), the four-year average impaired-loan ratio increasing to above 6% (currently around 4.2%), the loan loss reserve coverage falling below 120%, and the CET1 ratio declining below 13% (1Q25: 17.6%).
SCBX's VR could also be downgraded to below SCB's VR if Fitch reassesses the notching approach between SCBX and its core operating bank, SCB. For example, this may occur if SCBX's common-equity double leverage looks likely to exceed 120% on a sustained basis. Additionally, if SCB's asset contribution to the group falls below 75%, it may signal increased exposure from non-bank businesses and a growing disparity in failure risk between the bank and the holding company.
Government Support Rating
SCBX and SCB
There could be negative action on the GSR if the government's ability to provide support declines, which could be evident from a downgrade of Thailand's Long-Term Foreign-Currency IDR.
There may also be negative rating action if Fitch believes that the government's propensity to provide support to SCB has diminished, for example, through a large decline in the bank's level of systemic importance. However, we do not expect any changes in systemic importance in the near-to-medium term.
SCBX's GSR notching differential to SCB may widen if Fitch reassesses the likelihood that there could be substantial differences in the authorities' treatment of the bank versus the rest of the group. For example, this may arise from stronger indications from the authorities that any support, should it be required by the group, would be focused on the bank only, in which case the GSR for SCBX could be downgraded by multiple notches.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
IDR and National Ratings
SCBX
An upgrade in the group VR could lead to similar action on SCBX's Long-Term IDR and National Long-Term Rating. The rating action on the National Long-Term Rating would also have to take into account the creditworthiness relative to peers rated on the national scale.
SCB
There could be positive rating action on SCB's IDRs and National Long-Term Rating following similar changes in either its GSR or the group's VR. The rating action on the National Long-Term Rating would also have to take into account the bank's credit profile relative to that of peers rated on the national scale.
Viability Rating
SCBX and SCB
Near-term upside on SCBX's and SCB's VRs appear limited given ongoing economic uncertainties. The VR could be upgraded over the longer term if the operating environment for banks in Thailand significantly improved, leading to enhanced prospects for through-the-cycle business performance. This may be reflected through sustained improvement on multiple financial metrics - for example, the four-year average OP/RWA ratio above 3.0%, the four-year average impaired-loan ratio below 3%, and the maintenance of other key loss absorption buffers such as a CET1 ratio above 16%.
Government Support Rating
SCBX and SCB
The GSRs for SCBX and SCB may be upgraded due to an improvement in the government's ability to support D-SIBs. This may be seen from an upgrade of the Thai sovereign Long-Term IDR, although any upward revision of the GSR would also need to take into consideration whether the government's propensity to support banks would remain unchanged at the higher sovereign rating level.
If the sovereign rating remains unchanged, there is unlikely to be an upside to SCB's GSR. However, there could be upside to SCBX's GSR if Fitch assesses that regulatory action towards SCBX and SCB in a resolution scenario would likely be very similar. This may, for example, be indicated by an increase in SCBX's level of systemic importance independent of SCB.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SCBX:
SCBX's Thai baht-denominated senior unsecured debt and THB150 billion medium-term note (MTN) programme are rated at the same level as its National Long-Term and Short-Term Ratings, as the notes are direct, unsecured and unsubordinated obligations of the issuer.
SCB:
SCB's USD500 million senior notes are rated at 'BBB', the same level as the bank's Long-Term IDR, as they represent SCB's unsecured and unsubordinated obligations.
SCB's Short-Term IDR (xgs) is mapped to 'F3(xgs)' as the bank's funding and liquidity score does not qualify for the higher option under Fitch's criteria.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
SCBX
A downgrade in SCBX's National Long-Term Rating would lead to a similar action on the rating of the MTN programme and the senior notes. However, the National Short-Term Rating on the MTN programme is unlikely to be downgraded unless SCBX's National Long-Term Rating is downgraded to 'A+(tha)' or below.
SCB
A downgrade in SCB's Long-Term IDR would lead to a similar action on the rating of the US dollar senior debt.
SCB's Short-Term IDR (xgs) would be downgraded if the bank's VR were to be downgraded to 'bb+' or lower.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
SCBX
An upgrade of SCBX's National Long-Term Rating would lead to an upgrade of the MTN programme and the senior notes. There is no rating upside on the National Short-Term Rating of the MTN programme because it is already at the highest level.
SCB
An upgrade in SCB's Long-Term IDR would have a similar effect on its US dollar senior debt ratings.
SCB's Short-Term IDR (xgs) could be withdrawn if the bank's VR is upgraded or if the funding and liquidity score is revised up to 'bbb+', as all of the bank's IDRs would then be more clearly driven solely by the bank's intrinsic credit profile.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
Fitch has assigned a Long-Term IDR of 'BBB' with Stable Outlook to The Siam Commercial Bank Public Company Limited (Cayman Islands Branch) (SCBCI), equalised with the rating on SCB, as it is part of the same legal entity.
Fitch has affirmed the current USD500 million senior notes under SCB at 'BBB'. The notes will be moved to SCBCI as the designated issuer.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
A downgrade of SCB's Long-Term IDR would lead to a downgrade of SCBCI's IDR and senior notes.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
An upgrade of SCB's Long-Term IDR would lead to an upgrade of SCBCI's IDR and senior notes.
VR ADJUSTMENTS
The operating environment score of 'bbb' has been assigned above the 'bb' category implied score for the following adjustment reason: sovereign rating (positive).
The asset quality score of 'bbb-' has been assigned above the 'bb' category implied score for the following adjustment reason: collateral and reserves (positive).
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
The Long-Term IDR assigned to SCBCI is directly linked to SCB's Long-Term IDR.