Bangkok--9 Sep--TRIS Rating TRIS Rating Co., Ltd. has affirmed the company rating of Siam Commercial Leasing PCL (SCBL) and the ratings of SCBL’s senior debentures at “A+”. At the same time, TRIS Rating has affirmed the ratings of SCBL’s guaranteed debentures at “AA” as a consequence of the guarantee received from its parent, Siam Commercial Bank PCL (SCB). The rating outlooks remain “stable”. The company and senior debenture ratings of SCBL, formerly known as Siam Panich Leasing PLC (SPL), are based on the business and financial support received from SCB. The ratings are enhanced from the standalone rating of SCBL since SCBL is considered as a strategic subsidiary of SCB in the auto hire purchase business. As of December 2007, SCBL’s loan receivables made up 8.8% of SCB’s consolidated loans and receivables, while its shareholders’ equity accounted 9.2% of SCB’s consolidated shareholders’ equity. Although, SCBL’s business policy has been changed in early 2008, the ratings are supported by sufficient cash flow from monthly installments of the existing loans that are maintained in SCBL to service its own debt obligations. However, these strengths are partially offset by the higher possibility of deteriorating asset quality during an unfavourable economic environment. SCBL’s guaranteed debenture ratings reflect credit profile of SCB, the 99.1% shareholder of SCBL and the guarantor for SCBL’s debentures. SCB’s credit rating is supported by its strong market position as the third largest commercial bank in Thailand with a strong operating branch network nationwide, its improving financial and business performance, its sound and experienced management team, and its strong cushion of capital fund and allowance for doubtful accounts against bad debts. SCB’s rating, however, is partly constrained by less favorable operating environment, uncertainty in the securities industry, intensifying competition in consumer and retail finance industry, which might limit the bank’s overall growth prospects and profitability. The “stable” outlook for SCBL’s company and senior debenture ratings reflect the status of SCBL as SCB’s important strategic entity together with the business and financial support from SCB. Any change in the relation of SCBL to SCB, including shareholding and support, could affect SCBL’s ratings. The “stable” outlook for SCBL’s guaranteed debenture ratings reflect the likelihood that SCB will deliver a medium-term financial performance as expected, and will be able to keep its leading market position in its core businesses and to control its asset quality efficiently as planned. The bank’s good risk management system, its proven track record and its strong capital fund will help mitigate future downside risks from less favourable operating environment. TRIS Rating reported that SCB is the third largest among all 12 Thai universal banks and has a strong franchise value. With a century of experience in the banking industry, SCB has developed a proficient management team and universal banking platform that has enabled the bank to compete in this very competitive industry. SCB’s centralization of the management and control system has been settled to benefit the overall group’s business control and cost efficiency, while decentralization of its business unit functions through its branch and subsidiary network nationwide has enhanced the group’s market position in its core businesses. The bank’s good risk management system, experienced management team and strong cushion of capital fund and allowance for doubtful accounts against bad debts should mitigate future downside risks. Before a recent change in SCBL’s business policy, the company was one of Thailand’s leading automobile hire purchase operators. After becoming a subsidiary of SCB in the second quarter of 2006, SCBL aggressively expanded its loan portfolio. The portfolio grew by 25%, from Bt42,710 million in 2005 to Bt53,329 million in 2006, and continued to grow by 43% to Bt76,410 million in 2007. SCBL’s business model has been changed since early 2008. The company has focused only corporate clients and shifted retail auto financing business to SCB. In addition, SCBL has acted as the auto loan servicer for 60-day-plus delinquent accounts for SCB and for its own existing accounts. TRIS Rating is concerned that higher living costs, high oil prices and lower prices of used car will depress SCBL’s profitability and weaken its asset quality, particularly when its non-performing loans (NPL) surged to 4.72% of adjusted average loans as of June 2008, from 2.47% at the end of 2007. However, the company’s efficient risk management system is partially offset such concern. TRIS Rating expects to see improvement of asset quality after the company passes on the transition period of transferring certain activities to SCB.