Bangkok--12 Jul--TRIS Rating TRIS Rating Co., Ltd. has affirmed the company rating of the Bank of Ayudhya PLC (BAY) at “A” and has also affirmed the rating of BAY’s subordinated debentures at “A-” with “stable” outlook. The ratings reflect the potential benefits arising from the bank’s strategic partnership with GE Capital Asia Pacific Ltd. (GE). GE is the active partner in managing BAY, and is expected to strengthen the bank’s financial and operational capabilities. BAY will leverage GE’s know-how in risk management, productivity and corporate governance which are keys to future growth of the bank. GE’s strengths in consumer finance complement BAY’s established business strategy, which has focused on retail banking since 2002. However, these strengths are partially offset by the remaining high non-performing assets, corporate culture adjustments in the transition period, and a less favorable economic and business environment, which might limit business growth and profitability. The “stable” rating outlook recognizes the likelihood that BAY will be able to improve financial and business performance in the medium term by leveraging GE’s strengths. Upgraded risk management systems and good control of asset quality are expected to help mitigate future downside risks arising from an uncertain economic environment. It is essential that BAY adjusts its corporate culture to incorporate elements from GE to drive organization growth. TRIS Rating reported that BAY is the sixth largest commercial bank in Thailand in terms of assets, with 9% market share in loans and 9.5% in deposits. BAY’s major shareholders are the Ratanarak family and GE, which held 32% and 29% of the shares as of January 2007, respectively. BAY’s profitability weakened substantially in 2006 due to huge provisions of Bt11.03 billion in preparing to comply with the new international accounting standard (IAS39). Integration will be the priority in 2007 with investing heavily in information technology systems to bolster its customer relationship management (CRM) and branch network. BAY will also need to set aside more provisions to fully comply with IAS39. Therefore, its profitability is unlikely to improve in 2007. TRIS Rating said, in the short term, partial benefits from synergy between BAY and GE should be seen, such as consumer banking market share, added franchise value and increased profitability from higher yields of consumer finance products. However, the non-performing loans (NPL) of its asset management company remain major concerns to improve profitability and asset quality. BAY’s NPL to total loan ratio as of December 2006 was 13.53%. BAY currently has a solid capital base following GE’s injection of Bt22.25 billion in new capital in January 2007. The bank’s capital adequacy ratio improved from 11.74% at the end of 2006 to 17.42% at the end of March 2007.