Bangkok--25 May--Fitch Ratings
Fitch Ratings (Thailand) has today assigned a National Short-term rating of ‘F1+(tha)’ to Standard Chartered Bank (Thai) Public Company Limited’s (“SCBT”) unsecured, unsubordinated debenture programme of up to THB15 billion with a maturity of no more than 270 days to be issued in several tranches over the next three years. The bank’s National Long-term rating is ‘AA+(tha)’.
SCBT’s credit ratings are premised on Standard Chartered Bank of the United Kingdom (“SC”, rated Long-term foreign currency Issuer Default ‘A+’ and Short-term ‘F1’) remaining the controlling shareholder. Any change in SC’s shareholding or support in SCBT could impact SCBT’s ratings. Since the ‘A-’ (A minus) foreign currency Issuer Default Rating of SCBT is currently capped by the Thai Country Ceiling (rated ‘A-’ (A minus)), any change in the Country Ceiling (which is one rating level above the sovereign rating) will also have an impact on the ratings of SCBT.
SC of the UK has indicated that SCBT will form an integral part of SC’s Asian banking network, with its long-established banking operations in the region including Hong Kong, Singapore, India and Malaysia. SC’s stake is intended as a long-term strategic holding and it exercises effective control of the SCBT board and management. In October 2005, SC completed the process of integrating its Bangkok branch operations with SCBT, giving the new entity combined assets of THB140bn, which rose to THB179bn at end-March 2006. While foreign ownership limits may restrict SC injecting additional capital into SCBT after 2009, there is flexibility to strengthen SCBT’s capital base before 2009 to a level which is sufficient for long-term business expansion, in order to minimise dilution of its ownership in SCBT. Given the reputation and resources of SC, Fitch believes that there is an extremely high probability that shareholder support would be forthcoming, if necessary.
In 2005, SCBT reported a net profit of THB1.8bn after setting aside THB1bn of provisions, up from THB764.7 million the previous year. Pre-tax profit improved more strongly to THB2.2bn from THB764.7m. In Q106, net profit rose to THB1.3bn from THB211m in Q105 while pre-tax profit increased to THB1.6bn. The improvement in its underlying operations reflects very strong consumer loan growth (principally personal loans), improved interest and dividend income from investments and improved fee and foreign exchange income.
At end-March 2006, SCBT’s impaired loans stood at THB2.7bn (3% of total loans) while loan loss reserves stood at THB3.2bn, equivalent to 116.3% of impaired loans and 82.6% of combined impaired and restructured loans, which appear strong. Nonetheless, aggressive growth in the volatile consumer loan portfolio could see delinquencies rise, particularly given the weakening operating environment.
At end-March 2006, SCBT’s total capital ratio stood at 13.3% of risk weighted assets with Tier 1 capital ratio of 12.8%. Although further asset growth may see SCBT’s capital ratios fall, sustained profitability should help maintain the ratios at relatively strong levels.
Contact: Chaiyapat Paitoon, Vincent Milton, Bangkok +662 655 4762/4759; David Marshall, Hong Kong +852 2263 9963.