Bangkok--7 Sep--TRIS Rating
TRIS Rating Co., Ltd. has upgraded the company rating of TMB Bank PLC (TMB) to “A” from “A-” and the rating of TMB’s subordinated debentures to “A-” from “BBB+” with “stable” outlook. The ratings reflect TMB’s capable management, steady development in the merger integration, international standard risk management framework and IT systems and stronger competitive position from extended franchise value after the three-way merger in September 2004. The ratings also reflect TMB’s improvement in profitability and liquidity as well as stronger capital status with success in recapitalization. However, these strengths are partially constrained by intense competitive environment and unfavorable business factors associated in the banking industry, which might deteriorate TMB’s asset quality and limit its business expansion and profitability.
The “stable” outlook reflects the expectation of improvement in TMB’s asset quality, profitability and liquidity. The strengths of each individual partner have created synergies that enhance franchise value for TMB and provide TMB with universal banking platform, and are expected to further enhance its competitive edge in providing full banking services. Achieving the bank’s group synergies and all-level organizational harmonization has yet to be proved.
TRIS Rating reported that the three-way merger in September 2004 has developed synergy and enhanced TMB’s franchise value through contribution of three parties. TMB’s market share in terms of asset size, thus, increased from the seventh rank as of June 2004 to the fifth rank among all Thai commercial banks. After the merger, TMB has proved to pass its transitional period, achieving reorganization and integration of its operation, human resource management, risk management framework and IT system, while being able to recover its financial performance in 2005 and the first half of 2006. As of June 2006, TMB reported Bt770,463 million in consolidated assets, up 7.4% from Bt717,199 million at the end of 2005, and reported net profits of Bt3,329 million for the first half of 2006, better than TRIS Rating’s expectation. TMB’s weakened liquidity position, after three-party combined funding structure, has been improved continuously after the merger. As of June 2006, TMB’s liquidity position was still lower than the industry average, but has been developed further through its funding restructuring plan during 2005 and the first half of 2006.
TRIS Rating said that TMB succeeded in raising capital by right offering, which added almost Bt10 billion to its shareholders’ equities. The success in recapitalization strengthened the bank’s cushion of capital fund against bad debt, which will support TMB’s plan to reduce non-performing asset level and to expand loan portfolio in the medium term.