Bangkok--11 May--Fitch Ratings
Fitch Ratings (Thailand) has today upgraded Siam Panich Leasing Public Company Limited’s (“SPL”) National Long-term rating to ‘A(tha)’ Outlook Stable from ‘BBB+(tha)’ and National Short-term rating to ‘F1(tha)’ from ‘F2(tha)’ following Siam Commercial Bank’s (“SCB”) successful tender offer, which increased the bank’s stake in SPL to 92.5% from 37.1%. The upgrade of SPL’s credit ratings is based on the likelihood of increased operational and financial support from SCB, now the majority shareholder. Fitch has also removed SPL’s ratings from Rating Watch Positive where they were placed on 28 February 2006.
At the same time, the agency affirmed SCB’s ratings at National Long-term ‘AA(tha)’ with a Stable Outlook, its National Short-term ‘F1+(tha)’ rating, the ‘F1+(tha)’ rating for its short-term debenture programme and National subordinated debt rating at ‘AA-(tha)’ (AA minus(tha)). Meanwhile, Fitch Ratings, the international rating agency, also affirmed SCB’s Long-term Foreign Currency Issuer Default Rating (“IDR”) at ‘BBB+’ with a Stable Outlook, Short-term foreign currency at ‘F2’, foreign currency subordinated debt rating at ‘BBB’, Individual at ‘C’, and Support at ‘2’.
The value of the tender offer, which totalled THB4.5 billion, should not have a significant impact on SCB’s liquidity and capital positions, considering the amount is only about 2.3% of SCB’s liquid assets and 6% of the bank’s Tier-1 capital at end-March 2006.
Future rating triggers will depend on the level of integration between SCB and SPL and control of the board and key management of SPL, the degree of name association with SCB, clearer evidence of strong financial and operational support from the bank if needed, as well as SPL’s ability to maintain strong financial performance in the face of a more challenging operating environment. Over the past four years, low interest rates, high consumer confidence and easier access to consumer credit have underpinned SPL’s strong growth. However, growth and profitability may be affected in 2006 by rising interest rates and higher delinquencies. SPL reported net income of THB875.3 million in 2005, up from THB848.7m in 2004, thanks mainly to robust hire-purchase growth A majority stake in SPL should help strengthen SCB’s earnings and profitability in the medium term, boost SCB’s retail banking franchise and give the bank greater oversight of SPL’s credit policies and operations, although SPL is likely to remain, at this stage, a distinct auto finance entity separate from SCB for business efficacy.
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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Contact: Chaiyapat Paitoon, Vincent Milton, Bangkok +662 655 4762/4759; David Marshall, Hong Kong +852 2263 9963.