Bangkok--18 Jul--Fitch Ratings
Fitch Ratings (Thailand) Limited has affirmed the ratings of Maybank Kim Eng Securities (Thailand) Public Company Limited’s (MBKET) at National Long-Term ‘AA(tha)’, and Kasikorn Securities Public Company Limited (KS) and SCB Securities Company Limited (SCBS) at National Long-Term ‘AA-(tha)’. The agency has also affirmed their National Short-Term Ratings at ‘F1+(tha)’. The Outlook is Stable.
Key Rating Drivers - National Ratings
The three securities companies’ ratings reflects Fitch’s belief of a high probability of support from their respective parents, Malayan Banking Berhad (Maybank, A-/Stable), Kasikornbank Public Company Limited (KBank, BBB+/‘AA(tha)’/Stable) and Siam Commercial Bank Public Company Limited (SCB, BBB+/AA(tha)/Stable)
MBKET has a strategically important role within Maybank’s universal banking model, particularly as the parent has an intention to broaden its presence into commercial banking in Thailand. MBKET benefits from Maybank’s name association, the parent’s representation on its board and aligned policies of key functions such as risk management, internal audit and compliance. Maybank currently has an 83.5% stake in MBKET.
KS’s and SCBS’s ratings reflect the full ownership, control and support from their respective parents, KBank and SCB. They are viewed as strategically important subsidiaries within their parent’s universal banking platform. The one-notch rating differential between the subsidiaries and the parent banks reflect their small scale as non-bank entities and limited contribution to the groups.
MBKET has retained its leading brokerage franchise with a market share of 12.3% in H113. Its parent Maybank has a strong presence in Malaysia, Indonesia and Singapore. KS had the third- largest market share of 5.6% in H113, although this also included business volume from its strategic alliance with Macquaries Securities (Thailand) Limited. SCBS had a market share of 3.3% in H113 (ranked 15th). SCB and KBank are the second- and fourth-largest banks in Thailand by asset.
Their 2013 profits are expected to be strong, based on significantly increasing stock market trading volume. Average daily trading value of the Thai stock market was THB61bn in H113, up sharply from THB32bn in 2012 and THB29bn in 2011. Their future financial performance would continue to be volatile due to reliance on brokerage commission revenue, while stock market trading volume could be affected by increasing volatility in foreign fund flows.
Rating Sensitivities - National Ratings
Any changes in the ratings of the respective parent banks’ could lead to similar rating action on their securities subsidiaries. Weakening in the parents’ ability or propensity to support (including reducing their stakes) their subsidiaries could negatively affect the ratings of MBKET, KS and SCBS, respectively. A significant increase in size, revenue and profit contribution to their respective group could result in a narrower notching although Fitch deems this as remote prospect given the significantly smaller securities sector relative to the banking industry.