Bangkok--9 Dec--Fitch Ratings
Fitch Ratings has today affirmed the Support ratings of Thailand’s Bank for Agriculture and Agricultural Cooperatives (BAAC), Government Housing Bank (GHB), and Government Savings Bank (GSB) at ‘2’; all three are wholly state-owned. Given these banks’ government ownership and public policy roles, Fitch believes there is a high probability that state support would be forthcoming, if necessary. Any change in the level of government ownership or support could affect the support ratings of these banks.
BAAC with asset of THB588bn is the largest rural finance lender in Thailand. For FY07/08, it reported a strong performance with net profit of THB5.6bn, almost double the net profit of THB2.9bn in FY06/07, due to higher loan growth and lower funding cost. Net interest margin (NIM) remained relatively high at 5.6%. However, BAAC’s impaired loans more than doubled to THB43.8bn (or 9.8% of loans) from THB21.6bn (or 5% at end-March 2007) mainly as a result of the implementation of a more stringent loan classification under IAS39.
GHB with assets of THB636bn is the largest provider of mortgage finance in Thailand, mainly to lower to middle income borrowers, with a market share of about 38%. Net profit rose 59% to THB3.7bn in 2007, due to improved loan yield, lower funding costs and stronger loan growth. NIM, while improving, remains relatively low at 1.5%. Due to the stricter accounting standard IAS39, GHB’s loan loss provisioning more than doubled to THB3.4bn in 2007 and is expected to further increase in 2008 and 2009 as economic conditions have weakened sharply. Impaired loans, THB52.5bn or 8.8% of total loans at end-2007, are also expected to increase due to stricter classification. While GHB’s liquidity ratios appear low, confidence in the bank is underpinned by full government ownership and support.
GSB with asset of THB757bn is the principal government-owned savings institution. For 2007, GSB continued to report strong net profit of THB10.7bn, despite higher provisions of THB6.4bn (37% of pre-provision profit) due to stricter provisioning rules. The bank’s net interest margin remained stable at about 3.5% in 2007. Impaired loans rose slightly to THB17.2bn, but remain relatively low at 3.7% of loans at end-2007. GSB’s capital base is the strongest of the three banks, with equity/asset ratio of 11.5%.
Contact: Patchara Sarayudh; Vincent Milton, Bangkok, +66 2 655 4761/59