Bangkok--Nov 29--Moody's Investors
Moody's Investors Service has upgraded Siam City Bank Public Company Limited's ("SCIB") bank financial strength rating ("BFSR") to D from D-. The bank's other ratings remain unchanged at Baa3 for senior debt and Baa3/Prime-3 for long-term/short-term deposits. The outlook for all ratings is stable.
Moody's said the upgrade of the BFSR reflects SCIB's healthy economic
capital base, credit quality which is among the best in Thailand, and improvements in profitability.
Moody's finds both SCIB's accounting and economic capital base satisfactory. Thanks to the NPL disposal and the government's cash injection, the bank's capital base was replenished in 2003. Despite the strong lending growth in recent years, its capital level, especially the core Tier-1 portfolio, remains acceptable. Based on Moody's estimates, SCIB's economic capital is also acceptable after taking account of the redeployment of assets into higher risk-weighted lending following the expected redemption of the outstanding AMC notes.
SCIB appears to have performed relatively well in containing credit risks, as new loans granted since the merger show better credit quality than pre-merger ones. However, Moody's will continue to monitor closely credit quality, especially given rising interest rates and the bank's rapid loan growth, albeit from a low base. Moody's nonetheless believes that a sharp deterioration in loan quality is unlikely because of its highly diversified loan mix and improved credit risk management.
Moody's thinks SCIB's profitability is slated to improve with the continued redemption redeployment of assets into better-yielding assets.
Computer system upgrades and branch rationalization make increased cross
selling and more extensive customer reach possible, driving earnings.
On the other hand, the rating agency cautions against a decline in government support and the challenge SCIB faces in maintaining its position as a mid-sized bank.
SCIB, headquartered in Bangkok, is Thailand's seventh largest bank. It
had total assets of Bt 465 billion (US$11 billion) as at September 30, 2005.
The ratings affected are:
Siam City Bank Public Company Limited -- Bank financial strength rating
upgraded to D from D-. The rating outlook is stable.
The ratings not affected are:
Siam City Bank Public Company Limited -- Long- and short-term foreign
currency deposit ratings of Baa3/P-3. The rating outlook is stable.
Hong Kong
Leo Wah
Asst Vice President - Analyst
Financial Institutions Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121
Singapore
Beatrice Woo
Vice President - Senior Analyst
Financial Institutions Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308 End.