Bangkok--18 Jun--Bank of Ayudhya
Fitch Ratings (Thailand) has assigned Bank of Ayudhya Public Company Limited’s (BAY; AA-(tha)/Stable) upcoming senior unsecured debentures of up to THB8bn a National Long-Term Rating of ‘AA-(tha)’. The debentures will be issued in two tranches with maturity of two and three years. The bank has an option to issue up to a further THB4bn of debentures. The proceeds will be used for the bank’s general corporate purposes.
Key Rating Drivers
The senior debentures are rated at the same level as BAY's National Long-Term Rating of ‘AA-(tha)’ as they represent unsecured and unsubordinated obligations of the bank.
BAY’s ratings are based on its standalone financial strength. The bank’s performance and asset quality have further strengthened while its capitalisation has remained adequate. The ratings also take into account BAY’s greater reliance on wholesale funding and a higher loans/deposits ratio compared with domestic peers and similarly rated international peers. The Stable Outlook reflects Fitch’s expectation that BAY would maintain its overall credit profile.
Rating Sensitivities
Any change in BAY’s National Ratings will affect the rating of the senior unsecured debentures.
An upgrade of BAY’s ratings is unlikely in the medium term given the bank’s narrow lending and deposits franchise and its high concentration in consumer loans relative to major domestic peers. An improvement in BAY’s deposits franchise, as measured by retail deposits funding as a share of total funding, an improvement in its loan/deposits ratio to levels closer to its major domestic peers’ and firmer liquidity buffer, should help strengthen its position at the current rating level. This is provided that strong asset quality and adequate capitalisation are maintained.
On the other hand, a substantial weakening in the bank’s capital position, or a significant deterioration in asset quality and an increase in liquidity risk due to aggressive asset growth or higher reliance on wholesale funding, could lead to negative rating action.
BAY was established in 1945 and is Thailand’s fifth-largest commercial bank. GEICH, a subsidiary of General Electric Captial Corportion Inc., holds a 25.3% stake, while the Ratanarak Group holds another 25%. The bank’s key subsidiaries are involved in auto finance, credit cards, consumer finance, securities and fund management.