Bangkok--20 Apr--Fitch Ratings
Fitch Ratings has today affirmed the National Long-Term Rating on CIMB Thai Bank Public Company Limited (CIMBT) at 'AA-(tha)'. The Outlook has been revised to Negative from Stable. CIMBT's National Short-Term Ratings and rating on its short-term senior debt programme have been affirmed at 'F1+(tha)'.
At the same time, Fitch also revised the Outlook on CIMB Thai Auto Company Limited's guaranteed bonds to Negative from Stable and affirmed the National Long-Term Rating at 'AA-(tha)'. A full list of rating actions is at the end of this rating action commentary.
The revision of the Outlook for CIMBT is consistent with Fitch's view on the credit profile of CIMBT's parent bank, Malaysia-based CIMB Bank Berhad (CIMB Bank), while the Outlook on CIMBT Auto's guaranteed bonds was revised following the change in the Outlook on CIMBT, the guarantor.
KEY RATING DRIVERS
NATIONAL RATINGS AND SENIOR DEBT
Fitch uses its institutional-support framework to rate CIMBT, as we believe the bank's parent CIMB Bank would provide extraordinary support, if needed. Fitch sees the Thai subsidiary as strategically important to the parent, which has a 94.8% stake in CIMBT, exercises management control and closely integrates the subsidiary within the group. The subsidiary also shares its parent's brand. That said, CIMBT accounts for only around 5% of group consolidated profit. The National Ratings also reflected Fitch's view on CIMBT's credit profile relative to financial institution peers rated on the national rating scale.
The rating on the short-term senior debt programme is equalised with CIMBT's National Short-Term Rating, as it represents senior and unsecured obligation of the bank.
GUARANTEED BOND
The rating of CIMBT Auto's guaranteed bond is based entirely on the irrevocable and unconditional guarantee provided by its direct parent, CIMBT.
RATING SENSITIVITIES
NATIONAL RATINGS AND SENIOR DEBT
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Fitch could take positive rating action if the parent was to demonstrate greater capacity or propensity to provide support. CIMBT's National Rating could be upgraded if it plays a significantly more important role within the group. For example, a sustained and material increase in contribution to the group, such as above 20% contribution in term of asset size and profit. However, we do not expect this to happen in the near-term.
Also, improvement in Fitch's view on CIMBT's credit profile relative to national rating peers could lead to an upgrade, but this is unlikely given the current Negative Outlook.
The Outlook on CIMBT's National Long-Term Rating could be revised to Stable if Fitch changes it view on the parent's credit profile.
The short-term senior debt programme is already rated at the highest of the scale; hence there is no upside.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Fitch would downgrade CIMBT's National Long-Term Rating if the credit profile of its parent was to deteriorate, or if the parent's propensity to provide extraordinary support was to reduce. For example, this could happen if the parent significantly reduced its shareholding to below 75%, or if there were weakening linkages in terms of integration and name or branding association, or a sign of declining commitment to provide financial and operational support to the Thai subsidiary.
GUARANTEED BONDS
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive action on CIMBT's National Long-Term Rating would lead to similar action on CIMBT Auto's guaranteed bond.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade of CIMBT's National Long-Term Rating would lead to a downgrade of CIMBT Auto's guaranteed bond.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Related to CIMB Bank Berhad.
Additional information is available on www.fitchratings.com