Bangkok--Dec 13--Fitch Ratings (Thailand)
Fitch Ratings (Thailand) has today assigned a National Short-term rating of ‘F1+(tha)’ to Siam Commercial Public Company Limited’s (“SCB”, rated ‘AA(tha)’) unsecured, unsubordinated debenture programme of up to THB20 billion with a maturity of no more than 270 days to be issued in several tranches over the next three years. The rating Outlook for all the ratings is Stable.
The ratings and Outlook reflect a sustained recovery in underlying earnings and profitability on the back of an improvement in asset quality that is likely to continue despite some weakening in economic growth in 2005 and a more challenging environment in 2006 due to rising interest rates. Fitch notes that the bank’s reserve and capital positions have also strengthened. SCB has one of the strongest universal banking franchises and management teams in Thailand.
SCB has benefited from its reform efforts adopted since the 1997 financial crisis, a strong corporate team 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 the first nine months of 2005 (“9M05”), net profit fell to THB14.6bn from THB15.5bn in 9M04 due mainly to lower one-off gains. SCB’s net interest margin is now among the strongest of its peers, at 3.2% in 9M05. However, Fitch notes that margins and net profitability may be impacted by rising funding costs and increased tax expenses in 2006.
SCB’s impaired loans amounted to THB74.6bn, or 12.6% of loans, at end-September 2005, and restructured loans at a further 7% of the loan book. The bank is targeting impaired loans of about 10% by year-end and 7% by end-2006. Loan loss reserves declined to THB61bn due to write-offs, equal to 81.8% of impaired loans, which is now one of the highest loss coverage ratios amongst Thai banks. Net impaired loans/equity fell further to 15.1% at end-September 2005 from 16.5% at end-2004, indicating relatively strong reserve and capital positions. At end-September 2005, its Tier 1 ratio stood at 12.2% and its total capital ratio at 15.7%. Capital should remain strong notwithstanding dividend payments and asset growth. While the bank estimates that it will need THB4bn-5bn in additional capital to cover operational risks under the new Basel II framework, it expects earnings growth to strengthen its capital base to fulfill such requirement without having to issue new shares.
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 auto 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.
National Short-term ratings: ‘F1(tha)’ indicates the strongest capacity for timely payment of financial commitments relative to other issuers or issues in Thailand. Under Fitch’s Thai national rating scale, this rating is assigned to the "best" credit risk relative to all others in Thailand and is normally assigned to all financial commitments issued or guaranteed by the Thai government. Where the credit risk is particularly strong, a "+" is added to the assigned rating.
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