Bangkok--8 Feb--Fitch Ratings
Fitch Ratings (Thailand) Limited has revised the Outlook on Standard Chartered Bank (Thai) Public Company Limited's (SCBT) Long-term Local Currency Issuer Default Rating (LTLC IDR) to Stable from Negative. At the same time, the agency has affirmed SCBT's Long-Term Local and Foreign Currency IDRs at 'A+' and 'BBB+'. A full list of rating actions is provided at the end of this comment.
Rating Action Rationale
The revision of the Outlook to Stable followed the Outlook revision of its parent, Standard Chartered Bank's (SC; 'AA-'/Stable) on 7 February 2013 (see related rating action commentary at www.fitchratings.com)
SCBT's IDRs, National and Support Ratings are based on a high probability of support if required, from SC given its near full ownership of the subsidiary and integration between the two entities. The support view also factors in the reputational risk to SC were SCBT allowed to default on its obligations.
The Outlook on SCBT's Long-Term Foreign Currency IDR remains Stable as the Foreign Currency IDR is capped by the Country Ceiling of 'BBB+'.
SCBT's Viability Rating (VR) reflects its resilient capital, sound performance and stable funding and liquidity. The VR also takes into account the ordinary support extended from the parent, especially in global networking, name sharing, funding, liquidity and risk management.
Rating Drivers and Sensitivities - IDR and VR
Any change in SC's shareholding structure, in its propensity to support or in the parent's ratings could impact SCBT's ratings. As SCBT's Foreign Currency IDR is capped by the Country Ceiling of 'BBB+', a change in Thailand's Country Ceiling could also affect SCBT's Foreign Currency IDR.
Further deterioration in asset quality, which is currently under pressure, could increase the VR sensitivity to a downgrade. SCBT's deteriorating trend in non-performing loans (NPL) since late 2011 could be weighed down by growth in special mention loans (SMLs), mainly to a single large corporate borrower, highlighting risk concentrations. This could lift the NPL ratio (end-H112: 4.2% of total gross loan) further above that of similarly rated domestic peers (end-H112: average at 2.6%). However, Fitch gains comfort from a continued high Tier 1 capital ratio (17.5% at end-H112); the highest among Thai banks, providing a strong buffer against potential losses.
SCBT's overall performance in H112 remained flat, with net profit and return on assets (ROA) of THB1.8bn and 1.3%, respectively. Loan growth was modest at 6% yoy. Although its deposit franchise remains weaker than that of peers, funding is supported by access to intergroup funding and its position as a net lender in the interbank market.
SCBT is Thailand's ninth-largest commercial bank by assets, with a market share of less than 2% each in loans and deposits at end-H112.
SCBT's ratings actions are as follows:
- Long-Term Foreign Currency IDR affirmed at 'BBB+'; Stable Outlook
- Short-Term Foreign Currency IDR affirmed at 'F2'
- Long-Term Local Currency IDR affirmed at 'A+'; Outlook revised to Stable from Negative
- Short-Term Local Currency IDR affirmed at 'F1'
- Viability Rating affirmed at 'bbb+'
- Support Rating affirmed at '2'
- National Long-Term Rating affirmed at 'AAA(tha)'; Stable Outlook
- National Short-Term Rating affirmed at 'F1+(tha)'
- National short-term unsecured and unsubordinated debenture programme affirmed at 'F1+(tha)'