Bangkok--31 Jan--TRIS Rating
TRIS Rating Co., Ltd. has assigned the company rating of Mega International Commercial Bank PLC (Mega ICBC) at “A+”. At the same time, TRIS Rating has assigned “T1” rating for Mega ICBC’s up to Bt3,000 million short-term debentures. The outlook of the bank has been assigned “stable”. The company rating reflects the strong parent supports Mega ICBC receives from its Taiwanese parent bank as a strategic importance to penetrate into Asia Pacific region. The rating also takes into consideration Mega ICBC’s strong market position in lending to Taiwanese investors as the only Taiwanese bank in Thailand, its good asset quality and its strong capitalization. The good prospects for Taiwanese investment in Thailand are also key drivers for Mega ICBC’s business expansion. However, the rating is partially constrained by less favourable economic and banking business environment and Mega ICBC’s limited franchise value and network in Thailand, compared with other well-established commercial banks.
The “T1” short-term rating reflects the long-term credit profile of the bank rated at “A+”, which considers the bank as a strategic important subsidiary of its parent bank in Taiwan. The short-term rating also reflects the bank’s ability to access liquidity sources due to the nature of commercial banks having high liquidity assets on their balance sheet and easy access to diversified funding sources. Mega ICBC’s high liquidity is supported by one-day access to credit lines from its parent bank, interbank markets, the bond repurchase market and the Bank of Thailand’s loan windows. In addition, Mega ICBC also has access to credit lines from the Central Bank of Taiwan, which Mega ICBC reserves as the last liquidity resource. This line normally takes two weeks to access.
The “stable” outlook reflects the likelihood that Mega ICBC will deliver a medium-term financial performance as expected, by leveraging its parent’s franchise to enhance its business expansion in the Thai commercial banking industry. The outlook is also based on the expectation that Mega ICBC will maintain its role as an important strategic subsidiary of its parent bank. To be a subsidiary of a foreign bank will benefit the bank in terms of expanded scope of business and
financial flexibility and liquidity. Strong support from its parent and its strong capital fund are expected to help mitigate future downside risks from uncertain economic and banking business environment.
TRIS Rating reported that Mega ICBC, which was granted a commercial bank license by the Ministry of Finance (MOF) of Thailand in August 2005, is a wholly-owned subsidiary of Mega International Commercial Bank in Taiwan (Mega ICBC, Taiwan). Before being granted the license, the bank had operated as a full foreign bank branch in Bangkok since 1947. Mega ICBC is highly integrated to its parent’s operational system, business model and strategies, and also leverages on its parent bank’s brand name. The bank’s customer base partly stems from the strong relationship between its parent and Taiwanese corporations that have invested in Thailand or that have subsidiaries in Thailand. Back-up credit lines from its parent bank provide Mega ICBC with sufficient liquidity and financial flexibility. Mega ICBC, Taiwan, is currently rated “A” from Standard & Poors and “A2” from Moody’s Investors Services, with a “stable”outlook from both rating agencies. The ratings were supported by its leading position in foreign exchange and trade finance markets, good asset quality, high liquidity and implicit support from Taiwanese government.
TRIS Rating said, as a new and small commercial bank, Mega ICBC has a limited franchise value compared with large local commercial banks, due to its small-sized banking network. As of June 2006, the bank’s total assets were Bt10,817 million, which was the smallest size of all Thai commercial banks. The bank serves a niche market of Taiwanese-based and Taiwanese-related business clients operating in Thailand. Currently, the bank’s Taiwanese clients in Thailand accounted
for about 80% of its loan portfolio. Mega ICBC had good asset quality, reflected by its ratio of non-performing loans to average loans at 4.32% as of June 2006, far lower than the average ratio of 9.8% for all 14 Thai universal banks. Supported by the bank’s larger capital base when transforming into a bank subsidiary, Mega ICBC increased its ability to expand loans to new medium-sized Taiwanese investment projects. As of June 2006, its capital adequacy ratio was 44.2%, however this rate is expected to decline when Mega ICBC’s portfolio expands.