Bangkok--7 Nov--Fitch Ratings
Fitch Ratings (Thailand) has affirmed the National Long-Term rating on Small and Medium Enterprise Development Bank of Thailand (SME BANK) at 'AAA(tha)' with Stable Outlook. The National Short-Term Rating has also been affirmed at 'F1+(tha)'.
KEY RATING DRIVERS
SME BANK's National Ratings reflect Fitch's belief that there is a high probability that the bank would receive state support, if needed. This is based on its status as a state policy bank controlled by the Ministry of Finance (MOF) and set up under specific legislation to fulfil key government objectives. SME BANK has close state linkages, and is 98.9% directly owned by the MOF.
There is a strong history of state financial support, such as in the form of loss compensation for cabinet-mandated projects. Furthermore, the bank has consistently received capital support from the government and expects to receive another substantial capital injection in the near term. The bank can also request that the MOF guarantee its bond issuance. The ministry guaranteed SME BANK's issuance of THB21 billion of bonds in October 2019.
The Stable Outlook reflects Fitch's expectations that the government's propensity to support the bank is unlikely to reduce in the medium term.
RATING SENSITIVITIES
There is no upside to the National Ratings of SME BANK as the ratings are already at the highest levels. Any perceived weakening in the sovereign's propensity to support SME BANK, for example if the bank's legal status as a state policy bank changes or if the government's ownership reduces, may result in a downgrade of its National Rating. However, Fitch deems such events to be unlikely in the medium term.
Additional information is available on www.fitchratings.com