Bangkok--Jun 9--Fitch Ratings
Fitch Ratings (Thailand) has today assigned Siam Commercial Bank Public Company Limited (“SCB”) a National Long-term rating of ‘AA(tha)’ with a Stable Outlook, a National Short-term rating of ‘F1+(tha)’ and a National subordinated debt rating of ‘AA-(tha)’ (AA minus (tha)). At the same time, Fitch has affirmed SCB’s Long-term foreign currency rating at ‘BBB+’ with a Stable Outlook, Short-term foreign currency at ‘F2’, foreign currency subordinated at ‘BBB’, Individual at ‘C’ and Support at ‘2’.
The ratings reflect a sustained recovery in underlying earnings and profitability on the back of an improvement in asset quality. The bank’s reserve and capital positions have also strengthened. SCB has one of the strongest universal banking franchises and management teams in Thailand. The Outlook for the ratings is Stable given underlying profitability and asset quality are likely to be maintained despite some weakening in the economic growth outlook for 2005. SCB’s foreign currency ratings are currently capped by the sovereign rating. A further significant decline in impaired and restructured loans, as well as structural improvements in the Thai economy and banking system, including the regulatory and legal framework, will also be necessary to support further improvement in the bank’s ratings.
SCB has benefited from the results of its reform efforts since the 1997 crisis, a strong corporate and retail franchise and a supportive economic environment. As the largest private mortgage lender in Thailand, SCB's performance has also been boosted by the recovery in the residential property market.
SCB reported a strong net profit of THB18.6 billion in 2004, up from THB12.6bn in 2003, due to a further fall in funding costs, improved fee and service income and non-recurring gains from investments. Underlying pre-provisioning earnings (excluding non-recurring gains from investments) also rose by 25.6%. In 1Q05, net profit fell to THB4.9bn from THB6.9bn in 1Q04 due mainly to lower one-off gains. SCB’s net interest margin is now among the strongest among its peers, at 2.8% in 2004 and 3.1% in 1Q05. However, Fitch notes that net profitability may be impacted by increased tax expenses in 2006.
SCB’s impaired loans amounted to THB77.6bn, or 13.5% of loans, at end-March 2005, and restructured loans a further 10% of the loan book. The bank is targeting impaired loans of about 10% by year-end and 5% by end-2006. Loan loss reserves declined to THB63.8bn due to write-offs, equal to 82.2% of impaired loans, which is now one of the highest loss coverage ratios amongst Thai banks. Net impaired loans/equity fell to 17% at end-March 2005 from 24.9% at end-2003, indicating strong reserve and capital positions. At end-March 2005, its Tier 1 ratio stood at 11.1% and its total capital ratio 14.7%. Capital should remain strong notwithstanding dividend payments and asset growth.
SCB, established under the Royal Charter in 1904, is Thailand’s oldest and fourth largest bank with a 12% share of deposits and loans. The Crown Property Bureau holds a 24% stake. SCB has leading affiliates in consumer finance, investment banking, fund management and insurance.
Contact:
Chaiyapat Paitoon,
Vincent Milton,
Bangkok +662 655 4762/4759;
David Marshall,
Hong Kong +852 2263 9963.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Fitch’s rating definitions are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days. End.