Fitch Affirms Ratings on Six Policy Banks in Thailand

Bangkok--2 Dec--Fitch Ratings Fitch Ratings has affirmed the ratings for the following policy banks in Thailand: Bank for Agriculture and Agricultural Cooperatives (BAAC), Export-Import Bank of Thailand (EXIM), Government Housing Bank (GH BANK), Government Savings Bank (GSB), Islamic Bank of Thailand (IBANK) and SME Development Bank of Thailand (SME BANK). At the same time, Fitch has withdrawn the Support Ratings for BAAC, GH BANK, and GSB as these are no longer considered relevant to the coverage. A full list of rating actions may be found below this release. KEY RATING DRIVERS All ratings are based on Fitch’s expectation of a high probability of extraordinary support from the Thai government towards these important policy banks. The banks have strong state linkages, and were set up under specific legislation to fulfil key public policy initiatives. There are also clear precedents of state support for these banks, such as for example, financial compensation for government policy initiatives, or capital injections in the event it is required. Thailand’s Ministry of Finance (MOF) has full ownership of EXIM, GSB, and GH BANK, and near-full ownership of BAAC and SME BANK. The MOF’s direct shareholding in IBANK is capped at 49%, but shareholdings from other state-owned banks mean that the government controls over 98% of IBANK’s shares. The Long-Term Issuer Default Ratings (IDRs) of EXIM and SME BANK are at the same level as the sovereign. The National Ratings of BAAC, EXIM, GH BANK, and SME BANK are at the highest possible level. IBANK’s Long-Term IDR and National Ratings are two notches below the sovereign, reflecting the lower direct MOF shareholding, and less explicit state support in its establishment act compared to the other policy banks. Although Fitch expects timely support to be provided to the banks, if needed, the performances and financial profile of BAAC, EXIM, GH BANK and GSB are such that support has not been required. However, SME BANK and IBANK have faced some challenges in performance and delinquencies, but Fitch views the weaker performance at these two entities as unlikely to affect the government’s propensity of support. In fact, additional capital injections are planned for both banks in coming months. RATING SENSITIVITIES – IDRS AND NATIONAL RATINGS The international ratings (assigned to EXIM, IBANK and SME BANK) would be similarly influenced by any changes in Thailand’s sovereign rating. The national ratings assigned to these banks would, however, not be impacted as the sovereign would still have the lowest default risk in the country. Any reduction in the sovereign’s propensity to support any of the banks could lead to a downgrade on both international and national scales. For example, a material reduction in the state shareholding, or a change in legal status, could be indicative of reduced state support and lead to a downgrade. However, Fitch views this as unlikely in the short- to medium- term. The rating actions are as follows: BAAC: National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable National Short-Term Rating affirmed at ‘F1+(tha)’ Support Rating affirmed at 2 and withdrawn EXIM: Long-term IDR affirmed at ‘BBB+’; Outlook Stable Short-term IDR affirmed at ‘F2’ Support Rating affirmed at 2 Support Rating Floor affirmed at ‘BBB+’ National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable National Short-Term Rating affirmed at ‘F1+(tha)’ GH BANK National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable National Short-Term Rating affirmed at ‘F1+(tha)’ Support Rating affirmed at 2 and withdrawn GSB: Support Rating affirmed at 2 and withdrawn IBANK: Long-term IDR affirmed at ‘BBB-’; Outlook Stable Short-term IDR affirmed at ‘F3’ Support Rating affirmed at 2 Support Rating Floor affirmed at ‘BBB-’ National Long-Term Rating affirmed at ‘AA(tha)’; Outlook Stable National Short-Term Rating affirmed at ‘F1+(tha)’ SME BANK: Long-term IDR affirmed at ‘BBB+’; Outlook Stable Short-term IDR affirmed at ‘F2’ Support Rating affirmed at 2 Support Rating Floor affirmed at ‘BBB+’ National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable National Short-Term Rating affirmed at ‘F1+(tha)’