Bangkok--Oct 5--Fitch Ratings
Fitch Ratings (Thailand) today assigned a National Long-term rating of ‘AA+(tha)’ to Export-Import Bank of Thailand’s (“EXIM”) Senior Unsecured debentures of up to THB7 billion to be issued this month. The debentures will have a maturity of up to five years. At the same time, Fitch Ratings (Thailand) has also affirmed EXIM’s National Long-term rating at ‘AA+(tha)’ with a Stable Outlook and National Short-term rating at ‘F1+(tha)’. EXIM’s International ratings were also affirmed at Long-term foreign currency ‘BBB+’ with a Stable Outlook, Short-term foreign currency ‘F2’ and Support ‘2’.
EXIM’s Long-term foreign currency rating will move in tandem with the Thai sovereign rating, as Fitch believes that there is a high probability that state support would be forthcoming, if necessary, owing to the bank’s full ownership and control by the MOF, as well as EXIM’s development policy role. Under the EXIM Act, if the bank suffers losses from undertaking business in accordance with government policies or resolutions of the cabinet, the Ministry of Finance (“MOF”) is required to appropriate funds from consolidated revenue to compensate EXIM for these losses. Similarly, losses on export and investment insurance are also protected. While there is no general guarantee for creditors, EXIM is in effect an organ of government and an integral part of the apparatus of the state.
EXIM plays a key role in providing export insurance and short- and long-term financing to Thai exporters. EXIM directly provides revolving lines of credit for pre-shipment financing, which makes up the bulk of its lending portfolio. EXIM is aiming to sustain growth by providing more long-term loans for merchant marine business, export-related manufacturing facility expansion and funding in investment projects in other emerging markets.
EXIM reported net income of THB477.2 million in 2004, a significant decline from the THB717.4m recorded the previous year, largely because of smaller gains from bad debt recovery and higher losses on sale of foreclosed properties. Pre-shipment financing, which accounted for the bulk of its loan portfolio, picked up 16.9% in 2004 while the total loan portfolio grew by 14.7%. Nonetheless, the net interest margin (“NIM”) fell to 2.5% in 2004 from 3% in 2003 due largely to intensified competition in the domestic market. In 1H05, EXIM reported a net profit of THB203.1m, up slightly from THB202.4m. Pre-provisioning profit rose more sharply by 24.1% to THB725.8m in 1H05 from THB584.9m in 1H04.
EXIM’s impaired loans increased slightly to THB5.2bn or 10.2% of total loans at end-June 2005, up slightly from THB4.9bn or 10.1% of total loans at end-2004. EXIM’s loan loss reserves (“LLRs”) amounted to THB4.9bn, equating to 94.1% of impaired loans, which appears to be relatively high, but would fall to 55.7% if the outstanding restructured loans were taken into account. Although EXIM’s reserve coverage is relatively strong, given its policy role, asset quality risks remain a concern, particularly given that it is expanding its lending activities for offshore projects.
EXIM is strongly capitalised, with Tier 1 capital of 17.7% at end-June 2005, reflecting solid government support, although asset growth may see this ratio decline over the next two years.
EXIM commenced operations in 1994 under the supervision of the MOF and the Bank of Thailand (“BOT”). The EXIM Act gives the MOF power to appoint and remove directors and to supervise its general administration. The main objective is to promote export business and Thai investments abroad, and the scope of EXIM’s activities is limited to those specified under the EXIM Act. In general, it may conduct any financial activity of a commercial bank with the exception of accepting public deposits.
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.
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