Bangkok--17 Dec--Fitch Ratings
Fitch has today affirmed Siam City Bank Public Company Limited's (SCIB) Long-term foreign currency Issuer Default rating (IDR) at 'BB', Short-term foreign currency rating at 'B', National Long-term rating at 'A-(tha)' (A minus(tha)), National Short-term rating at 'F1(tha)', Individual rating at 'D', Support rating at '4' and Support Rating Floor at 'B+'. The Outlook is Stable.
SCIB's ratings reflect the bank's still weak franchise and, while improving, its limited financial strength. SCIB reported a net loss of THB2bn in 2007, due mainly to large provisioning as a result of more stringent classification. The bank reported a recovery in 9M08 with a net income of THB3.5bn, mainly from much lower provisions. However, the GDP outlook for 2009 has weakened sharply, which is likely to affect the bank's performance.
SCIB's NPLs increased to THB20.3bn (or 7.6% of total loans) at end-September 2008, from THB18.4bn or 7.3% at end-2007. Loan loss reserves coverage ratio of 76.4% at end-September 2008 is in line with peers. While SCIB plans to reduce its NPLs ratio to below 5% by end-2009 (mainly through debt restructuring and NPL sales), the bank is likely to face renewed asset quality pressure in 2009 given the expected sharp economic slowdown. SCIB has a relatively large investment portfolio of THB97.3bn, which accounted for about 23% of total assets. The portfolio consisted mainly of government securities at 65% and foreign debt securities (mostly sovereign bonds) at 15%.
The bank's capital position is adequate, with Tier 1 and total capital ratios at end-September 2008 of 11.5% and 12.7%, respectively. Basel II implementation is expected to impact capital ratios by about 150 bp by year-end. A continuation of the deteriorating economic conditions may result in further pressure on the capital ratios.
The Outlook is Stable given the ratings are already relatively low. The strengthening of the bank's franchise, risk controls and management as well as a clearer long-term strategy and support of a major shareholder could improve the ratings in the medium term.
SCIB was nationalised following the 1997 financial crisis, and in 2002, merged with another nationalised bank, Bangkok Metropolitan Bank. The central bank's Financial Institutions Development Fund (FIDF) still retains a 48% stake, although this is expected to be divested and hence there is a limited probability of state support. The bank has nearly 7000 employees and over 400 branches with a 6% market share, as well as subsidiaries in insurance, securities, asset management and leasing.
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.
Contacts: Patchara Sarayudh, Bangkok, +662 655 4761; Vincent Milton, Bangkok, +662 655 4759.
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