Bangkok--25 Sep--Fitch Ratings Fitch Ratings has today revised the Outlook on the International and National Long-term ratings of the Bank of Ayudhya Public Company Limited (BAY) to Positive from Stable. This follows the increasing commitment of GE Capital International Holdings Corporation (GECIH) to the bank, as evidenced by BAY’s planned purchase of GECIH’s auto loan business in Thailand, as well as additional capital increases in July and last week resulting in GECIH increasing its stake in BAY to 35% from 29%. BAY’s ratings are now as follows: Long-term foreign currency Issuer Default Rating (IDR) ‘BBB-’ (BBB minus) with Positive Outlook, Short-term foreign currency IDR ‘F3’, National Long-term Rating ‘A+(tha)’ with Positive Outlook, National Short-term Rating ‘F1(tha)’, Individual rating ‘C/D’, Support rating ‘3’, Support Rating Floor at ‘BB’, subordinated debt rating at ‘BB+’ and National subordinated debt rating at ‘A(tha)’. Earlier in January 2007, Fitch Ratings upgraded BAY’s ratings after GECIH completed the acquisition of a 29% stake in the bank. The Outlook revision is based on the increasing commitment of GECIH, as well as BAY’s stronger capital position and franchise, notwithstanding the difficult operating environment in 2007. While asset quality remains weak, strong capital buffers and an expected improved economic outlook in 2008, together with the operational and financial support of GECIH, should see its performance improve over the next one to two years. Downside risks could arise from a further period of weak economic growth and political instability which more severely impacts loan growth and asset quality. The capital raisings in 2007 enable BAY to address loan loss reserve and capital adequacy weaknesses, which had in part, previously constrained the bank’s ratings. The increasing commitment from GECIH should also bolster the bank’s retail banking franchise. GECIH has strong representation at both the board and senior management levels of BAY, including the newly appointed CEO and CFO. BAY could also benefit from GECIH’s expertise in global transaction services, technology and operations. The shift towards higher-margin consumer banking should, additionally, help improve the bank’s profitability in the medium term, although it could also increase earnings volatility. BAY reported net loss of THB7.8 billion in H107, due to significantly higher provisions and loss on debt restructuring. Impaired loans increased to THB76bn, or 16.5% of total loans, from THB64bn, or 13.8%, at end-2006. Although BAY’s loan loss reserve coverage has continued to improve, rising to 49% of impaired loans at end-June 2007, this still appears low compared to some of its peers, implying a risk of further provisioning. While BAY does not expect any further large provisioning, the bank now has sufficient buffer to absorb a more aggressive clean up of its balance sheet. After capital increases - THB27.8bn in January 2007, THB9.1bn in July 2007 and THB2.6bn in September 2007 - BAY’s Total capital ratio and Tier 1 capital ratio rose to approximately 20% and 15%, respectively, at September 2007. These ratios are likely to fall to about 16% and 12%, respectively, by year-end following the completion of the acquisition of GE Capital Auto Lease with assets of about THB94bn in used car and motorcycle financing. Additional provisioning and asset growth could see the capital ratios decline further, but the bank should still remain strongly capitalised. BAY was established in 1945 and is Thailand’s sixth-largest commercial bank, with 561 branches and market shares of about 10% in lending and deposits. It has affiliates in finance, securities, insurance, fund management, factoring and leasing. Given BAY’s relatively large share of deposits and loans, there is a moderate probability of government support, should this be needed. Contacts: Vincent Milton, Bangkok, +662 655 4759; David Marshall, Hong Kong, +852 2263 9911. 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.