Bangkok--15 Mar--Fitch Ratings
Fitch Ratings has assigned ICBC (Thai) Leasing Company Limited's (ICBCTL: AAA(tha)/Stable) upcoming issue of senior unsecured bonds of up to THB5bn, in two tranches due in 2016 and 2017, National Long-Term ratings of 'AAA(tha)'. ICBCTL has an option to issue a further amount of up to THB3bn. The proceeds will be used for refinancing and for funding the expansion of the company's auto loan portfolio.
Rating Action Rationale
The senior notes are rated at the same level as ICBCTL's National Long-Term rating of 'AAA(tha)' as they represent unsecured and unsubordinated obligations of the company.
The ratings reflect a very high support probability from its sole shareholder Industrial and Commercial Bank of China (Thai) Public Company Limited (ICBCT; AAA(tha)/Stable), in case of need. The ratings are equalised with those of ICBCT to reflect ICBCTL's role as a core subsidiary of its parent bank. This is evident in the name-sharing, full ownership and high board representation by and strong funding support from ICBCT. It is integral to ICBCT's operations via its key role in the auto hire purchase business - which is an important part of the group's retail banking - and through its high revenue and asset contribution to the group.
In 2012, ICBCTL continued to report strong loan growth of around 40% yoy (2011: 54% yoy), mainly due to the company's expansion strategy and also due to the government's policy on first-car tax exemption. Return on assets improved slightly to 0.7% in 2012 (2011: 0.6%), while its non-performing loan (NPL) ratio eased to 1.3% (2011: 2.1%).
ICBCTL (formerly Leasing Sinn Asia Company Limited) is a wholly owned subsidiary of ICBCT and has been its flagship company for the auto hire purchase and leasing business in Thailand since 2005. The company has expanded its loan portfolio significantly since 2010, when ICBC (A/Stable) became the largest shareholder of ICBCT. At end-2012, it was ranked number nine in Thailand's hire purchase and financial lease industry with a market share of around 3%.
Rating Drivers and Sensitivities
A downgrade of ICBCTL is likely to stem from a similar action on ICBCT, and in turn, from ICBC. However, Fitch believes this is unlikely in the near term given the Stable Outlook of ICBC's ratings. A material reduction in ICBCT's ownership in or a significant weakening in the propensity of support for ICBCTL may result in negative rating action. Diminished importance to ICBCT through sharply lower contribution to ICBCT's loan portfolio, revenue and profit could lead to ICBCTL's rating being notched down from that of ICBCT.