Bangkok--22 Sep--Fitch Ratings
Fitch Ratings (Thailand) has today assigned Kasikornbank Public Company Limited's (KBank; AA(tha)/Stable) upcoming Thai baht-denominated Basel III-compliant Tier 2 subordinated unsecured notes a National Rating of 'AA-(tha)'. This is the second such issue by the bank, who 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.
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 (that is, the risk it becomes 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 is driven by its strong domestic franchise and market share. KBank also has sound and improving asset quality, steady funding and liquidity, strong capitalisation, as well as high – albeit softening – profitability. KBank's ability to maintain a sound financial position in spite of market volatility is evident from the steady improvement in the bank's key financial metrics in recent years.
RATING SENSITIVITIES
Any change in KBank's stand-alone credit profile and in its National Long-Term Rating would similarly affect the rating of the notes.
KBank's National Long-Term Rating could be upgraded if the operating environment stabilises and the bank sustains recent improvements in financial buffers while maintaining acceptable risk appetite levels.
Protracted economic weakness that results in larger-than-expected and sustained impacts on asset quality, profitability and capitalisation could lead to a downgrade of the Viability Rating, which would also impact its IDRs and National Ratings.
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 rating: 'AA-(tha)'