Bangkok--24 Jan--Fitch Ratings
Fitch Ratings has affirmed Thailand-based non-bank financial institution Finansa Public Company Limited’s (FNS) National Long-Term Rating at ‘BBB-(tha)’ with a Negative Outlook. It also affirmed the company’s National Short-Term Rating at ‘F3(tha)’.
KEY RATING DRIVERS
FNS’s ratings reflect its relatively small size, weaker performance, and lack of institutional support compared with other non-bank financial institutions in Thailand rated by Fitch. However, the ratings are supported by its reasonable presence in the financial advisory and securities businesses, and its moderate leverage.
There have been improvements in FNS’s leverage and liquidity, but a sustainable track record is not yet evident. A continuation of these positive trends would see a revision of the Outlook to Stable. This is balanced by the vulnerability of FNS’s underlying earnings to an industry downturn.
FNS’s equity structure has strengthened following capital increases in December 2012 and May 2013, which totalled THB 378m and is evidence of continued support from key shareholders. On a standalone basis, the ratio of total liabilities to total equity has improved to 0.46x at end-September 2013, from 1.35x in end-2011.
The group’s financial performance also improved in the first three quarters of 2013, helped by its securities and investment banking businesses. As a result, FNS has returned to profitability, with a consolidated net income of THB 6.5 million 9M 2013 (compared to a loss of THB 34.0 million in 2012). However, Thai financial markets are volatile and competitive, and industry conditions have worsened over the past several months.
RATING SENSITIVITIES
Continued improvement in FNS’s leverage and liquidity profiles, on both a standalone and consolidated basis, could lead to the Outlook being revised to Stable. However, a ratings upgrade is unlikely under the company’s current business model, which is susceptible to market volatility.
FNS’s ratings could be negatively affected by a persistent increase in leverage, or by a failure to maintain sufficient liquid assets. Consistent losses from FNS’s underlying operations could also lead to a ratings downgrade.
The list of rating actions is as follows:
National Long-Term Rating affirmed at ‘BBB-(tha)’; Negative Outlook
National Short-Term Rating affirmed at ‘F3(tha)’