Bangkok--15 Nov--Fitch Ratings
Fitch Ratings has today affirmed Bangkok Bank's ("BBL") foreign currency Issuer Default rating at 'BBB+' with a Stable Outlook, its Short-term foreign currency rating at 'F2', its subordinated debt rating at 'BBB', its Individual rating at 'C' and its Support rating at '2'. Meanwhile, Fitch Ratings (Thailand) has affirmed BBL's National Long-term rating at 'AA(tha)' with a Stable Outlook, its National Short-term rating at 'F1+(tha)' and its National subordinated debt rating at 'AA-(tha)' (AA minus(tha)).
The ratings reflect continued improvements in BBL's underlying profitability and asset quality, as well as its solid capital and liquidity positions resulting from its strong deposit franchise. BBL's IDR is currently capped by the sovereign rating. Further improvement in its ratings would also require a further significant decline in impaired and restructured loans, as well as structural improvements in the Thai economy and banking system, including the regulatory and legal framework. In view of BBL's size, strong institutional ties and systemic importance to the Thai financial sector and economy, Fitch views that there is a high probability that the bank would receive state support should the need arise.
Although the operating environment weakened in 2006, BBL's financial performance remained strong. The key performance driver in 2007 will be loan growth, which should help offset the impact of higher funding costs as depositors shift to higher-rate fixed terms.
Net income rose to THB20.4 billion in 2005 from THB17.7bn in 2004, due to the redemption of high-cost hybrids and rising loan yields. In 9M06, unaudited net income fell to THB13.8bn from THB16.4bn in 9M05 due mainly to increased tax expenses and a special non-recurring charge as a result of a reduction in the value of assets transferred to the Thai Asset Management Corporation ("TAMC"). Pre-tax pre-provisioning profit increased 26.7% yoy in 9M06, helped by stronger loan growth. The net interest margin rose slightly to about 3% on an annualised basis in 9M06 from 2.9% in 2005.
BBL reported a sharp improvement in asset quality in 2005 due to write-offs, the partial repayment by Thai Petrochemical Industry ("TPI") and the reclassification of TPI to normal status. Although impaired loans rose to THB108.8bn (11.3% of loans) at end-June 2006, from THB100.8bn (11.1% of loans) at end-2005 due to the relapse of restructured loans, 9M06 results indicate an improvement. BBL aims to reduce impaired loans to below 10% by end-2006 and to a mid single-digit percentage by end-2007. Reserves stood at THB77.5bn at end-June 2006 or 71.2% of impaired loans, which appears reasonable although additional losses on restructuring or disposal of bad loans are possible.
BBL has the strongest liquidity position of the Thai banks, reflecting the depth of its deposit franchise and its risk aversion since the country's 1997 financial crisis. At end-June 2006 BBL's adjusted Tier 1 capital stood at about 11.6% of risk-weighted assets and adjusted total capital are relatively strong at about 14.5%.
Established in 1944 by the Sophonpanich family, BBL is the market leader with a 20% domestic market share, although it now faces tougher foreign competition. Corporate and SME banking remain BBL's core franchise, while retail banking is seen as a key platform in the longer term. While largely focused on the Thai market with local affiliates in securities, insurance and fund management, BBL also has a regional banking network.
Contact: Chaiyapat Paitoon, Vincent Milton, Bangkok, Tel: +662 655 4762/4759; David Marshall, Hong Kong, +852 2263 9963.
Media Relations: Mayra Cunningham, London, Tel: +44 20 7417 3557.
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.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com . Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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