Bangkok--30 Jun--Fitch Ratings
Fitch Ratings (Thailand) has today affirmed Finansa Public Company Limited’s (FNS) National Long-term rating at ‘BBB(tha)’ with a Stable Outlook, and its National Short-term rating at ‘F3(tha)’.
FNS’s ratings reflect its financial holding company structure and adequate capital and liquidity positions. However, they also take into account the lack of a strong institutional shareholder and FNS’s high dependence on volatile earnings from its securities brokerage, investments and trading.
FNS reported a net loss of THB614.9m in 2008, which was mainly due to losses related to the disposal of CDO investments, and weak investment banking and securities activity. In Q109, FNS reported a net loss of THB161.1m due to the weak business environment and following a significant decrease in revenue due to the sale and scaling-down of its loan portfolio and part of its investment portfolio. This has resulted in a shrinking of FNS’s balance sheet and a strengthening of its equity-to-asset ratio to 34.3% at end 2008, and to 40.4% at end March 2009.
The scaling down of some of FNS’s finance-related business should be positive for the group given its lack of competitiveness in those segments, and will enable FNS to focus more on its core businesses, such as investment and fee-based businesses. FNS’s plan to merge its securities business with two other securities companies is also likely to strengthen its securities business in the longer term due to an expected increase in market share in the brokerage business, although FNS will only hold about 25% of the new entity.
About 98% of FNS’s funding is short-term, largely depository receipts issued by its subsidiary and bills of exchange issued by FNS to institutional and retail investors. Nevertheless, FNS has adequate liquidity to meet its short-term obligations. As of 31 March 2009, FNS’s current ratio was 1.3x, indicating it has a strong ability to repay short-term liabilities.
FNS’s equity-to-asset ratio strengthened at end March 2009 mainly due to asset contraction. Meanwhile, equity declined, due to losses over the past three years, to THB1.7bn at end-March 2009 (end-2005: THB3.1bn).
Although global financial market conditions remain weak, the Outlook is Stable due to FNS’s strong capital buffer and the reduction in its businesses’ risk profiles. However, downside risks could stem from worse-than-expected capital markets and tightening liquidity conditions. FNS lacks the support of a strong financial institutional shareholder, increasing its vulnerability to event risks and/or market volatility.
Contacts: Narumol Charnchanavivat, Vincent Milton, Bangkok, Tel: +662 655 4763/4759.
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.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.