Bangkok--29 Aug--Moody's Asia Pacific
Moody's Investors Service has upgraded Bangkok Bank's ("BBL") bank financial strength rating ("BFSR") to "D+" from "D". The bank's debt and deposit ratings are unaffected. The outlook for all ratings is stable. The upgrade concludes the revision in the outlook for BBL to positive from stable.
"The upgrade of the BFSR reflects BBL's healthy capital base, improvements in credit quality, and increases in profitability," says Leo Wah, a Moody's Assistant Vice President/Analyst.
Moody's considers both BBL's regulatory and economic capital base as satisfactory. Thanks to the reduction in non-performing loans ("NPL") (from 25.8% at end-2002 to the current level 11.3%) and the recovery in profitability, the bank has built up its capital base, leading to more than a tripling of its capital since 2001.
As such, BBL's regulatory capital level, including the core Tier-1 portion, remains acceptable despite the moderate increase in loans in recent years. Based on Moody's estimates, it also possesses satisfactory economic capital (adjusted for possible additional loan losses), and which would support not only the expansion in its loan book but also provide a cushion against any rapid rise in NPL. But the latter is unlikely under Moody's current assessment of the Thai economy.
"BBL's profitability, defined as risk-adjusted pre-provision profit, has risen gradually over the past few years due to the widening in net interest margins and continued increases in recurring non-interest income," says Wah.
At the same time, further improvements in profitability would likely hinge on the bank's strategy and ability to make use of its under-utilized balance sheet. Its current gross loan-to-deposit ratio of 77% is significantly below the average of 93% for the other three large
Thai banks, providing room for high volumes and interest margins.
The upgrade also recognizes that BBL has taken appropriate steps to rectify the control problem in its New York branch that caused the US Office of the Comptroller of the Currency ("OCC") to issue a cease-and-desist order against certain branch activities. The impact on business is believed to have been insignificant. Moody's will monitor its internal controls going forward, although the incident is considered as an isolated one.
For future rating actions, Moody's will focus on: 1) resolution of its lingering NPLs; 2) how it enhances profitability by taking advantage of its under-utilized balance sheet; and 3) its internal control standards. But as the rating agency does not expect such performances to change drastically over the next few years it has therefore considered the stable as outlook. Headquartered in Bangkok, BBL is Thailand's largest bank, with total assets of Bt 1,498 billion (US$39 billion) at end-June 2006.
The following rating was rating was upgraded: Bangkok Bank -- Bank financial strength rating to "D+" from "D".
The other ratings -- which are unchanged -- are: Bangkok Bank -- Foreign currency long-term/short-term deposit ratings of
Baa1/P-2. Bangkok Bank Public Company Ltd. (Hong Kong) -- Foreign currency subordinated long-term debt rating of Baa2.
For more information please contact:
Hong Kong
Leo Wah, CFA
Asst Vice President - Analyst
Financial Institutions Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 2916-1121
Singapore
Beatrice Woo
VP - Senior Credit Officer
Financial Institutions Group
Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308