Bangkok--25 Oct--Fitch Ratings
Fitch Ratings has today affirmed the ratings of seven major Thai banks and removed them from Rating Watch Negative on which they were placed on 20 September 2006 following the military coup. The Outlook on their ratings is now Stable. This action follows a similar removal of the Negative Rating Watch and affirmation of the sovereign rating of the Kingdom of Thailand.
Bangkok Bank: Long-term foreign currency Issuer Default rating ("IDR") 'BBB+'/ Outlook Stable; Short-term foreign currency 'F2'; Individual 'C'; Support '2'; subordinated debt 'BBB';
Krung Thai Bank: Long-term foreign currency IDR 'BBB+'/ Outlook Stable; Short-term foreign currency 'F2'; Individual 'C/D'; Support '2'; subordinated debt rating 'BBB'; Tier-1 hybrid 'BBB-' (BBB minus);
Siam Commercial Bank: Long-term foreign currency IDR 'BBB+'/ Outlook Stable; Short-term foreign currency 'F2'; Individual 'C'; Support '2'; senior unsecured debt 'BBB+'; subordinated debt 'BBB';
Kasikornbank: Long-term foreign currency IDR 'BBB+'/ Outlook Stable; Short-term foreign currency 'F2'; Individual 'C'; Support '2'; subordinated debt 'BBB';
United Overseas Bank (Thai): Long-term foreign currency IDR 'A-' (A minus)/ Outlook Stable; Short-term foreign currency 'F2'; Individual 'C/D'; Support '1';
Standard Chartered Bank (Thai): Long-term foreign and local currency IDR 'A-' (A minus)/ Outlook Stable; Short-term foreign and local currency 'F2'; Individual 'C'; Support '1';
Export Import Bank of Thailand: Long-term foreign currency IDR 'BBB+'/ Outlook Stable; Short-term foreign currency 'F2'; Support '2'.
All the National ratings on the seven banks listed above are also affirmed.
Thailand’s major banks have so far weathered the short-term negative impact of the political crisis on economic growth. If confidence is restored quickly by the newly appointed government, a rebound in consumer and investment spending could see higher growth and stronger performance for the major banks in 2007. Given the strength of the ministerial appointments to the Finance and Economic portfolios, structural reforms, which had stalled under the previous administration, could be accelerated, notwithstanding the interim government’s limited term and mandate. Fitch expects that new legislation and policies on financial institutions and the central bank, if implemented, should help strengthen the regulatory and operating framework for Thailand’s financial system. These include consolidated supervision and stronger oversight of state-owned policy banks, proposed measures on deposit insurance and further amalgamation of the nationalised banks, as well as steps to effect a final resolution to the bad loan overhang from the 1997 crisis.
Third quarter results released last week indicate the larger banks continue to perform strongly, despite a weakening operating environment. While loan growth has slowed considerably, net interest margins and asset quality have generally held up for the larger banks, with only a slight weakening in some banks. Higher taxes and additional provisioning and losses on restructuring or disposal of bad loans, due in part to collateral revaluation of loan transfers to the government-owned Thai Asset Management Corporation, moderately affected overall results. While the disposal of the banks’ remaining bad loans could see additional losses or provisions in the next year, this is not expected to have a substantial impact on the overall net profit results, though it could hurt the mid-sized banks with still low loan-loss reserves. The change in government and the economic impact of major floods could temper economic growth and weaken Q4 results for the banks, but loan growth is expected to pick-up in 2007 on the back of an economic rebound which should help underpin the major banks’ continued strong performance.
Contacts: Vincent Milton, Bangkok +66 19180510; David Marshall, Hong Kong, +852 2263 9911.
Disclosure: Kasikorn Asset Management Company Limited (of which KBANK holds 99.99%) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operation of, or credit rating reviews undertaken by, Fitch Ratings (Thailand) Limited.
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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