Bangkok--28 Aug--Fitch Ratings
Fitch Ratings (Thailand) has rated Kasikornbank Public Company Limited's (KBank; AA(tha)/Stable) proposed Thai baht-denominated subordinated unsecured notes at 'AA-(tha)'. This will be KBank’s first issue of a Basel III-compliant Tier 2 instrument. The bank will use the proceeds to strengthen its Tier 2 capital and for general corporate purposes.
KEY RATING DRIVERS
The Basel III Tier 2 notes are rated one notch below the anchor rating to reflect their higher loss-severity risk relative to senior unsecured instruments arising from their subordinated status. Key terms of the notes include a non-viability trigger (defined as emergency capital assistance from the central bank or any other empowered government agency), with a partial rather than mandatory full write-down feature.
The Tier 2 notes are senior to any Additional Tier 1 securities with loss-absorption features. In the event of a write-down, the Tier 2 notes would be written down on a pari passu basis with all other Tier 2 loss-absorbing instruments with write-down features of the issuer.
KBank's National Long-Term Rating of ‘AA(tha)’ is used as the anchor rating because the rating is based on the bank's stand-alone financial strength. Fitch believes that the bank's stand-alone credit profile is the best indicator for non-performance risk (i.e. becoming non-viable). No additional notching has been applied as the notes do not have any going-concern loss-absorption features.
KBank’s stand-alone financial strength reflects its solid domestic franchise, improved asset quality, steady funding, sound capitalisation, as well as its high profitability.
RATING SENSITIVITIES
Any change in KBank’s stand-alone credit profile and in its National Long-Term Rating would similarly affect the rating of these notes.
A significantly weaker-than-expected operating environment and local economy could result in a negative rating action on KBank’s Issuer Default Ratings, Viability Rating, and National Rating. Deterioration in asset quality that leads to a material erosion of profitability or capital could negatively affect KBank’s ratings. There is limited rating upside over the next one to two years.
The other ratings of KBank are unaffected and are as follows:
Long-Term Foreign Currency IDR: 'BBB+'; Outlook Stable
Short-Term Foreign Currency IDR: 'F2'
Viability Rating: 'bbb+'
Support Rating: '2'
Support Rating Floor: 'BBB-'
National Long-Term Rating: 'AA(tha)'; Outlook Stable
National Short-Term Rating: 'F1+(tha)'
Senior unsecured USD2.5bn euro medium-term note programme: 'BBB+'
Long-term foreign currency senior unsecured debt: 'BBB+'
National short-term senior unsecured debt rating: 'F1+(tha)'
National long-term subordinated debt (legacy Basel II Tier 2 securities) rating: 'AA-(tha)'