Bangkok--24 Oct--Fitch Ratings
Fitch Ratings has affirmed Standard Chartered Bank (Thai) Public Company Limited’s (SCBT) Long-Term Foreign-Currency Issuer Default Rating (LT FC IDR) and Long-Term Local-Currency Issuer Default Rating (LT LC IDR) at ‘A-’ and ‘A+’ respectively. At the same time, the agency has also affirmed SCBT’s National Long-Term Ratings at ‘AAA(tha)’. A full list of rating actions is provided at the end of this comment.
KEY RATING DRIVERS
SCBT’s ratings reflect Fitch’s belief of a high probability of support from its parent, Standard Chartered Bank (SC; ‘AA-’/Stable). SCBT is a strategically important subsidiary of SC, with close integration in terms of business strategies, management, funding, branding and operations.
The Stable Outlook on SCBT’s LT LC IDR is consistent with that of its parent. The Outlook on SCBT’s LT FC IDR is Stable as it is capped by Thailand’s Country Ceiling of ‘A-’.
SCBT’s Viability Rating (VR) reflects its solid capitalisation, satisfactory performance, adequate funding and liquidity. The bank’s asset quality has deteriorated further, with its non-performing loan (NPL) ratio rising to 6.3% at end-H113 from 5.2% at end-2012, mainly driven by the increase in NPLs from restructured loans in its asset management’s subsidiary, which require NPL classification. High household debt within Thailand may also begin to hurt asset quality. However, the worsening in asset quality is mitigated by the bank’s strong level of capital, which can absorb potential credit losses and supports existing rating levels. Its Tier 1 capital ratio increased to 18.8% (unconsolidated number) at end-H113 from 16.9% at end-2012, due to profit accumulation.
The VR also takes into account the ordinary support from its parent, especially in global networking, funding, liquidity and risk management.
Rating Sensitivities - IDR and VR
Any change in SC’s IDRs would lead to similar rating action on SCBT. A negative rating action could occur if there is a material reduction in SC’s shareholding or in its propensity to support the Thai subsidiary. SCBT’s Foreign-Currency IDR is capped by Thailand’s Country Ceiling, and hence could be affected by a change in the latter.
SCBT’s VR is under pressure from current asset-quality trends. A further weakening in asset quality, notwithstanding existing capital strengths, may lead to negative rating action on SCBT’s VR.
SCBT is Thailand's tenth-largest commercial bank by assets, with a market share of around 1% each in loans and deposits at end-H113.
SCBT’s ratings actions are as follows:
- Long-Term Foreign-Currency IDR affirmed at ‘A-’; Stable Outlook
- Short-Term Foreign-Currency IDR affirmed at ‘F2’
- Long-Term Local-Currency IDR affirmed at ‘A+’; Stable Outlook
- Short-Term Local-Currency IDR affirmed at ‘F1’
- Viability Rating affirmed at ‘bbb+’
- Support Rating affirmed at ‘1’
- 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)’