Bangkok--11 Jun--Fitch Ratings Fitch Ratings (Thailand) has today affirmed Thanachart Bank Public Company Limited's (TBANK) National Long-term rating at 'A(tha)'/Stable Outlook, National Short-term rating at 'F1(tha)', Individual rating at 'C/D' and Support rating at '4'. The agency has also affirmed the holding company, Thanachart Capital Public Company Limited's (TCAP) National Long-term rating at 'A-(tha)' (A minus(tha)) /Stable Outlook, National Short-term rating at 'F2(tha)', and Support rating at '5'. Bank of Nova Scotia (Scotia, 'AA-' (AA minus)/'F1+') is expected to increase its stake in TBANK to 49% in 2008 from 25%, subject to regulatory approvals. This should strengthen TBANK's franchise and financial performance in the medium term. Increased ownership and control by Scotia should be positive for the bank's credit profile in the medium term, but limited diversification, asset quality and profitability pressures remain key concerns. TCAP's ratings are based on the maintenance of its low leverage. As TCAP's remaining hire purchase portfolio runs down in the next year, TCAP will be more reliant on earnings growth and dividend payouts from TBANK. TBANK reported net profit of THB1.0 billion in 2007, a sharp increase from THB0.2bn in the previous year, reflecting the transfer of the hire purchase business and other group-related subsidiaries (insurance, fund management and securities) from TCAP. The bank's net interest margin (NIM) rose slightly to 2.8% from 2.7% in 2006. Impaired loans increased significantly to THB5.2bn at end-2007 from THB3.8bn in 2006, but were still relatively low at about 2.3% of total loans. However, special-mention loans, mainly auto finance, rose significantly to THB19bn (8.5% of total loans) from THB10.3bn (5.1% of total loans). Provisioning also rose sharply to THB2.6bn from THB1.3bn. The bank expects about THB3bn in provisioning in 2008. Loan loss reserve coverage of about 80% appears relatively high. But in Fitch's view, given the bank's aggressive growth in recent years and the increase in special mention loans, it faces further provisioning risks. At end-2007, TBANK reported stronger Tier 1 capital of THB20.0bn or 10.2%, due to the capital increase in July 2007. Continued strong asset growth is likely to require further capital raising in the next one to two years. TBANK is now the main operating entity within Thanachart Group (formerly National Finance) for auto finance and other related financial services in securities, funds and insurance. Scotia is Canada's third largest bank, with assets of USD412bn and a significant overseas presence in the Caribbean and Latin America. Auto finance and retail banking is one of its strengths. Contacts: Darunee Peanmanakit, Vincent Milton, Bangkok +662 655 4752/4759. 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. Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215.