Bangkok--25 Sep--Fitch Ratings
Fitch Ratings (Thailand) Limited has assigned Bank of Ayudhya Public Company Limited’s (BAY; ‘AA-(tha)’/Stable) upcoming 10-year unsecured subordinated debentures of up to THB12bn a National Long-Term ‘A+(tha)’ Rating. The bank will have an option to sell a further THB8bn of debentures. The proceeds will be used for the bank’s general corporate purposes.
In line with Fitch's approach to rating such performing instruments, the debentures are notched down a level from the issuer's National Long-Term Rating. BAY’s ratings are based on the bank’s standalone financial position, robust performance, strong capital position and improving asset quality. The ratings also consider BAY’s greater use of wholesale funding, relative to similarly rated peers, to match its asset profile.
Positive rating action may result from significant improvement in BAY’s deposit franchise to a level closer to its major domestic peers, as measured by the share of retail deposits of total funding. Maintaining its strong capital position and sustainable profitability may also benefit the ratings. Any sharp increase in liquidity risk, including heavier reliance on wholesale funding, risk of significant deterioration in asset quality due to aggressive asset growth or material weakening of capital position may lead to negative rating action.
BAY was established in 1945 and is Thailand’s fifth-largest commercial bank by consolidated assets with around 8% share each in loans and deposits at end-June 2012. Its key subsidiaries are involved in auto finance, credit cards, consumer finance, securities and fund management. Given BAY’s share of deposits and loans, there is a moderate probability of government support, in case of need.