Bangkok--18 May--Fitch Ratings
Fitch Ratings has today revised the Outlook on Bank of Ayudhya Public Company Limited’s (“BAY”) Long-term Foreign Currency Issuer Default Rating (“IDR”) to Positive from Stable, and affirmed the rating at ‘BB+’. At the same time, the agency affirmed BAY’s Short-term foreign currency rating at ‘B’, foreign currency subordinated debt rating at ‘BB’, Individual rating at ‘D’ and Support ratings at ‘3’. Fitch Ratings (Thailand) also revised the Outlook on BAY’s National Long-term rating to Positive from Stable, and affirmed the rating at‘A(tha)’ rating, National Short-term rating at ‘F1(tha) and National subordinated debt rating at ‘A-(tha)’ (A minus(tha)).
Today’s rating action follows the announcement by the BAY’s board of directors that it is considering a proposed acquisition by GE Capital Asia Pacific (“GE Capital”) via a private placement of new shares. This could result in GE Capital holding about 25% of BAY’s capital. BAY’s board resolved that the proposed offer price is acceptable, but the final terms, the size of the private placement and shareholding by GE Capital are still subject to the approval of the bank’s board and the consent of the Bank of Thailand (“BOT”). If completed, GE Money Retail Bank, which is part of the GE Group, will need to surrender its banking license to the BOT under the Financial Sector Master Plan “One Presence” policy, which allows a financial conglomerate to have only one deposit-taking institution. At end-March 2006, GE Money Retail Bank had a total assets of THB17.3 billion while BAY had total assets of THB661bn.
On 11 May 2006, Fitch upgraded BAY’s ratings primarily reflecting the continued improvement in underlying profitability, although concerns remained about the strength of its reserve coverage and capital adequacy. The injection of new capital should resolve these weaknesses, as well as bolster the bank’s franchise, particularly its retail banking platform. BAY is also likely to benefit from GE Capital’s expertise in global transaction services, technology and operations. The shift towards higher-margin consumer banking should help improve the bank’s profitability. Fitch views the proposed acquisition by GE Capital as transformational for BAY and potentially for the Thai bank sector as a whole.
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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