Bangkok--15 May--Fitch Ratings Fitch Ratings (Thailand) Limited has today assigned National Long-term ratings of ‘A+(tha)’ to two tranches of Bank of Ayudhya Public Company Limited’s (BAY) unsecured and unsubordinated debentures of up to THB20 billion, due 2010 and 2011. The Outlook on the bank is Positive. The rating reflects the bank’s strong capital position and franchise, together with the operational and financial support of GE Capital International Holdings Corporation (GECIH) which now holds 35% of total shares in the bank. The increasing commitment from GECIH should also bolster the bank’s retail banking franchise and help improve the bank’s profitability over the medium term. Moreover, BAY benefits from GECIH’s expertise in global transaction services, technology and operations. BAY reported a net profit of THB1.0bn at end-Q108, or a 9% yoy decrease, due mainly to a higher provisioning charge against its expanding retail book, as well as additional mark-to-market losses on collateralised debt obligation (CDO) investments. Nonetheless, CDO exposure is small and the bank’s underlying profitability continues to improve with BAY’s net interest margin rising to 3.3% in Q108 from 3.0% in 2007. BAY’s non-performing loans (NPLs) remain relatively high at THB70bn, or 13% of total loans at end-Q108. While its loan loss reserve coverage improved slightly to 51% of NPLs at end-Q108, this still appears low compared to its peers, implying a risk of further provisioning. At any rate, the bank now has sufficient capital buffer to absorb such costs and embark on a more aggressive clean up of its balance sheet. The bank expects to sell about THB16bn of NPLs in 2008, which should see NPLs decline to below 10% by year-end. Following the completion of bank’s acquisition of GE Capital Auto Lease (GECAL) (with assets of THB78bn) in February 2008, BAY’s Tier 1 and total capital ratios fell to about 14% and 18%, respectively. Additional provisioning and asset growth could see the capital ratios decline further, but the bank should still remain strongly capitalised. Fitch’s Positive Outlook on the bank is based on the expectation that strong capital buffers and the expected rebound in domestic growth, together with the management, operational and financial support of GECIH, should see continued improvement in the bank’s performance over the next one or two years. The bank’s retail book (mainly auto, mortgage and unsecured personal loans) now accounts for about 33% of total loans and is expected to increase to 50% by 2010. BAY was established in 1945 and is Thailand’s fifth-largest commercial bank, with 568 branches and a 9% market share in lending and 8% market share in 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; Darunee Peanmanakit, Bangkok, +662 655 4752.