Bangkok--3 Jul--Fitch Ratings
Fitch Ratings (Thailand) has affirmed Finansia Syrus Securities Public Company Limited's (FSS) National Long-Term Rating at 'BBB+(tha)' with a Stable Outlook, and its National Short-Term Rating at 'F2(tha)'.
KEY RATING DRIVERS
FSS's ratings reflect its moderate company profile, limited diversification outside the brokerage business and ongoing execution risk for its business initiatives. The operating environment remains challenging, with reduced retail trading volumes, but FSS's low leverage provides some buffer against volatility in earnings.
Fitch believes the difficult industry conditions and weak retail investor sentiment caused FSS's softening profit in 2018. The firm's above industry-average concentration in the high fixed-cost brokerage business may continue to hamper its profitability. Longer-term earnings are dependent on the success of initiatives to reduce costs and enhance non-brokerage revenues.
FSS's capitalisation is higher relative to its similarly rated local peers, and helps shield FSS from market volatility and business stresses. A sound liquidity profile, demonstrated by a net liquid capital ratio that is consistently much stronger than regulatory requirements, also provides some buffer for the company from downside risks.
Fitch expects FSS to maintain its retail franchise strength in the brokerage business over the medium term, underpinned by its strong retail client base. Consistent revenue contribution from non-brokerage businesses, such as derivatives products and wealth-management services, is likely to be gradual.
RATING SENSITIVITIES
A significant and persistent deterioration in profitability and earnings, without a commensurate capital buffer, could trigger a negative rating action. For instance, Fitch might downgrade the ratings if the company's operating profit/equity ratio showed signs of becoming weaker than peers on a prolonged basis.
A rating upgrade would be possible if FSS strengthened its business franchise in terms of diversification, without excessively increasing risk appetite or sacrificing its risk controls, leading to sustainable improvement in key financial metrics through the industry cycle. However, Fitch does not expect this to happen in the near to medium term.
Additional information is available on www.fitchratings.com