Bangkok--29 Jun--Fitch Ratings
Fitch Ratings has today affirmed Standard Chartered Bank (Thai) Public Company Limited’s (SCBT) Long-term foreign currency and local currency Issuer Default ratings (IDR) at ‘BBB+’ with Stable Outlook, Short-term foreign currency and local currency ratings at ‘F2’, Individual Rating at ‘B/C’, Support rating at ‘2’, National Long-term rating at ‘AA+(tha)’ with Stable Outlook and National Short-term rating at ‘F1+(tha).
SCBT’s ratings reflect the bank’s strong financial position as well as strong support from its controlling shareholder, Standard Chartered Bank Plc’s (SC, Long-term foreign currency IDR: ‘A+’). SCBT forms an integral part of SC’s Asian banking network. SC’s stake is intended as a long-term strategic holding and it exercises effective control of the SCBT board and management. After 2009, with foreign ownership restrictions on further capital raising exercises, SCBT may have to depend on retained earnings, asset distribution and Tier 2 capital to mitigate dilution of SC’s shareholding level. Given SC’s reputation and resources, Fitch believes there would be a high probability of shareholder support, if required.
SCBT reported an unconsolidated net income of THB2bn in 2008, up 15.6% yoy. The increase in net income was mainly due to higher income from financial market products (i.e. foreign exchange and derivative contracts) and lower provisioning expenses. Meanwhile, SCBT’s net interest and dividend income declined 20.9% yoy to THB7.2bn in 2008, largely due to the declining interest rate environment and the increasing portion of lower-yielding mortgage loans as the bank reduces its exposure to higher-risk unsecured personal loans.
SCBT’s impaired loan ratio of 2.4% at end-2008 remains among the lowest in the industry. The bank’s loan loss reserve coverage ratio of 137.2% at end-2008 is strong, although given the stressed economic conditions and the bank’s still large exposure to volatile unsecured consumer loans (26% of total loans at end-2008), provisioning risks remain.
SCBT’s capital ratios declined moderately to 12.1% for Tier 1 capital ratio and 12.5% for total capital ratio at end-2008, mainly due to operational risk charges under Basel II. The bank has recently completed a THB7.2bn capital increase which will result in Tier 1 capital increasing to about 16% to support future business expansion, and minimise potential ownership dilution in the longer term. SCBT’s liquidity position is supported by its very low loans-to-deposit and short-term funding ratio of 49.5%, and high liquid assets to wholesale funding ratio of 425.6% at end-2008.
SCBT was established in 1933 by the Wanglee family. The bank was nationalised as a result of the 1997 financial crisis and was later acquired by SC, which now holds a 99.97% stake. SCBT currently ranks as the 8th largest Thai commercial bank with a market share of less than 2%.
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, Vincent Milton, Bangkok, +662 655 4761/4759.
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