Bangkok--15 Jun--Fitch's rating Fitch Ratings has today affirmed Thailand's TMB Bank Public Company Limited's (TMB) ratings following the announcement by the central bank, the Bank of Thailand (BOT), that it may not permit TMB to make the coupon payment on its hybrid Tier 1 securities due June 30. The ratings are as follows: - Long-term foreign currency Issuer Default Rating (IDR): at 'BB+' - Short-term foreign currency IDR: 'B' - Foreign currency subordinated debt: 'BB' - Foreign currency hybrid Tier 1: 'B' - Individual: 'D' - Support: '3' - National Long-term: 'A(tha)' - National Short-term: 'F1(tha)' - National subordinated debt: 'A-(tha)' (A minus (tha)) The Support Rating Floor is unchanged at 'BB'. The Outlook on TMB's Long-term ratings remains Stable. This follows Fitch's earlier rating action taken in January 2007, when it revised the rating outlook on TMB's Long-term ratings from Positive to Stable and downgraded the hybrid rating to 'B' from 'B+', to reflect the bank's deteriorating financial performance and heightened deferral risk. The agency noted at the time that deferral depended in part on how stringently the BOT interpreted the rules on hybrid instruments. As the bank still has large retained losses and could report another loss in 2007, the BOT appears to have toughened its earlier stance when it permitted a coupon payment in January 2007. TMB reported Q107 profit of only THB220 million, due to large provisions of THB1.2 billion. The bank estimates that it needs to make an additional THB4bn provision to meet stricter provisioning rules by end-2007. At end-March 2007, non-performing loans remained high at 11.1% of total loans. While Tier 1 capital appears adequate at 7.4%, the bank has low loan loss reserve coverage of 46.6% of impaired loans, which could see further provisions impacting its capital position. The bank's retained losses stood at around THB60bn at end-March. Fundamentally, the bank still has a weaker franchise compared to the other large Thai banks and the benefits from shareholder DBS have been negligible due to its small stake of 16% and limited management involvement. As noted in January, a planned recapitalisation in 2007 should help stabilise both the IDRs and hybrid rating. The Ministry of Finance, which currently holds a 31% stake in TMB, should provide some support to the capital raising. As the hybrid deferral was expected by the agency and reflected in TMB's current ratings which are already low (with a 4 notch difference between the Long-term IDR and the hybrid), no further rating action is warranted at this stage. However, an extended period of deferrals, a significant deterioration in financial performance and/or failure to raise further capital and reduce retained losses, could lead to a further downgrade in the bank's IDR and hybrid rating. Contacts: Chaiyapat Paitoon, Vincent Milton, Bangkok +662 655 4762/4759; David Marshall, Hong Kong +852 2263 9963. 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. Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6336 0095. 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. The issuer did not participate in the rating process other than through the medium of its public disclosure. 101 Finsbury Pavement, London, EC2A 1RS