Bangkok--16 Mar--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the ratings of Krungthai Card PLC (KTC) and its current senior debentures at “A-”. At the same time, TRIS Rating has assigned the “A-” rating to KTC’s proposed up to Bt3,000 million senior debentures. The rating outlook remains “stable”. The ratings reflect KTC’s capable management, efficient operation system and good risk management system that enable the company to sustain its strong market position in the credit card business, and its strategy to diversify into the personal loan business. The ratings also take into consideration the strong support it receives from major shareholder, Krung Thai Bank PLC (KTB). However, these strengths are partially constrained by the intensely competitive environment, unfavorable business factors, and regulatory risk, which might effect the company’s business expansion and profitability in the future.
KTC’s “stable” outlook reflects TRIS Rating’s expectation that the company will be able to maintain its leading position in the credit card business, despite intense competition and risk factors associated with the current business environment, and should be able to sustain the acceptable credit quality of its growing portfolio from both existing (credit card, personal loans, self-employed loans) and new (cash revolving loans) products. The company’s strong capitalization and its good operational and risk management systems are expected to help mitigate future downside risk from any adverse changes in the business environment.
TRIS Rating reported that KTC continues to maintain its strong market position in the credit card business, in terms of number of cards issued, with a market share of almost 13% as of December 2006. However, changing business conditions (tighter regulations on the minimum repayment required and qualifications of credit card holders, an interest rate cap for the personal loan business, the economic slowdown and lower consumer confidence) have limited KTC’s loan portfolio growth and profitability.
As of December 2006, KTC had total loan receivables of Bt40,126 million, a 40.6% increase from Bt28,529 million at the end of December 2005. The receivables comprised credit card loans (68%), personal loans (21%), self-employed loans (9%), and circle loans (2%).
KTC reported Bt439 million in net profit for 2006. Its return on average equity (ROAE) declined to 7.76% (from 11.97% in 2005) and the return on average assets (ROAA) declined to 1.23% (from 2.49% in 2005). KTC’s delinquency rate (loans more than 90 days past due) was 3.2% as of December 2006, up from 3.1% in 2005, 2.6% in 2004, and 1.8% in 2003. The rise was a result of KTC’s strategy to diversify its loan portfolio and expand personal loans which have higher risk at a greater rate of return. KTC’s total allowances for loan losses increased from Bt647 million in 2005 to Bt1,006 million as of December 2006. Due to loan portfolio expansion, the company’s leverage ratios for both equity per assets and equity per total loans dropped to 13.6% and 14.2%, respectively, while its debt to equity ratio rose to 5.94 times, said TRIS Rating.