Bangkok--11 Apr--Moody's Moody's Investors Service has affirmed the positive outlook on Siam Commercial Bank Public Company Limited's (SCB) D+ bank financial strength rating (BFSR) as well as on its A3 local currency deposit and foreign currency senior debt ratings. In the same rating action, Moody's has affirmed the bank's Baa1/Prime-2 long-term/short-term foreign deposit ratings. "Moody's maintains a cautiously optimistic outlook and states that the affirmation reflects the significant and ongoing improvements evident in SCB's risk management processes to levels commensurate with those of its global peers," says Karolyn Seet, a Moody's Assistant Vice President/Analyst. "Furthermore, the robust state of the bank's franchise and net interest margins continue to strengthen on the back of its diversification into retail banking and despite the military coup in September 2006," says Seet. "The affirmation in the outlook -- rather than an upgrade of the BFSR - was also prompted by the pressures on interest spreads expected in 2008 and intensifying competition, particularly in the small- and medium-sized enterprise (SME), retail and hire purchase sectors," says Seet. "Other reasons for the action include the narrowing in loan growth discrepancy between SCB and its closest competitors, especially with the full completion of IAS39-related provisions; its large single-client exposures, which border on the high-side; and the continued existence of political risks," says Seet. "The potential also exists for the bank's financial fundamentals to remain under pressure for the foreseeable future," says Seet. In addition, SCB's above-average loan growth could prove difficult to sustain, given the current global credit turmoil, high oil prices, rising inflation, slowing global trade and exports, and the appreciation of the Thai baht. Further, credit write-downs could be taken as a result, and the bank must be able to weather elevated loan loss provisions, thereby making it more difficult to justify any upgrade in its BFSR. A significant deterioration in the franchise value of its SME, retail and hire purchase banking business lines could lead to negative pressure on the BFSR. Conversely, a material strengthening in asset quality -- NPL ratio under 2% - and improved loan granularity are key factors that could create upward pressure on the BFSR. The local currency deposit rating of SCB incorporates a 3-notch lift for the support Moody's expects would be forthcoming from the Thaigovernment. Based on this rating and the expectation of very high probability of support, the outlook on the deposit and debt ratings of SCB is positive. The bank's foreign currency deposit rating is also constrained at Baa1, the country's ceiling. Headquartered in Bangkok, SCB is Thailand's third largest bank, with total assets of Bt 1,165 billion as of December 31, 2007. Singapore Karolyn C. Seet Asst Vice President - Analyst Financial Institutions Group Moody's Singapore Pte Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (65) 6398-8308 Singapore Beatrice Woo VP - Senior Credit Officer Financial Institutions Group Moody's Singapore Pte Ltd. JOURNALISTS: (852) 2916-1150 SUBSCRIBERS: (65) 6398-8308