Bangkok--29 Jun--Fitch Ratings Fitch Ratings has today affirmed Kasikornbank Public Company Limited’s (KBANK) ratings as follows: Long-term foreign currency Issuer Default Rating (IDR) at ‘BBB+’, Short-term foreign currency IDR at ‘F2’, Individual at ‘C’, Support at ‘2’ and its long-term foreign currency subordinated debt at ‘BBB’. The Bank’s Support Rating Floor remains unchanged at ‘BBB-’ (BBB minus). At the same time, the agency has affirmed the bank’s National Long-term rating at ‘AA(tha)’, National Short-term rating at ‘F1+(tha)’, its National long-term and short-term senior unsecured debt at ‘AA(tha)’ and ‘F1+(tha)’, respectively, as well as its subordinated debt at National Long-term ‘AA-(tha)’ (AA minus(tha)). The Outlook on the bank remains Stable. KBANK’s ratings reflect the sustained improvement in the bank’s underlying profitability, its asset quality and capital and its strong domestic banking franchise in the middle market, corporate and retail banking. Given KBANK’s large deposit share, strong institutional links and importance to the Thai economy, Fitch believes that there is a high probability the bank would receive state support should the need arise. KBANK’s debt ratings are currently capped by the country’s sovereign rating (‘BBB+’/Stable). A further improvement in the bank’s ratings would 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. The weakening operating environment could affect KBANK’s performance in 2007, although this is not expected to be significant. KBANK expects corporate, SME and retail loan growth to recover in 2008. The bank is also expanding SME lending in China, although the initial exposure is expected to be small. Net profit remained relatively stable at THB13.7 billion in 2006 from THB14bn in 2005. The bank reported a 7.1% rise in pre-provisioning profit before tax due to strong loan growth, increased loan yield and improved fee and foreign exchange (forex) income. The net interest margin appeared relatively high at 3.9% when compared with most other banks. In Q107, net income rose to THB3.9bn from THB3.6bn in Q106 due to improved interest and dividend income from loan growth, increased loan yield, improved fee and forex income and larger gains on investments. Impaired loans fell to 7% of gross loans at end-2006, before rising slightly to 7.2% at end-March 2007 as a result of the weakening operating environment. Loan loss reserves stood at THB33.3bn, equating to about 67% of the remaining impaired loans. At end-March 2007, the bank’s Tier 1 capital stood at 10.3% of total risk-weighted assets (RWAs), while total capital stood at 14.4%. Capital should remain strong on the back of solid earnings, offsetting the impact of dividend and asset growth. KBANK, established in 1945 by the Lamsam family, is Thailand’s fourth-largest commercial bank, with a 13% share of deposits and loans. The Lamsam Group remains the bank’s single largest shareholder (although its stake has been significantly diluted since the 1997 crisis) and is still involved in the bank’s management and board. Its major subsidiaries are involved in fund management, securities and leasing. Contacts: Chaiyapat Paitoon, Vincent Milton, Bangkok, +662 655 4762/4759; David Marshall, Hong Kong, +852 2263 9963. 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. 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.