Bangkok--8 Jul--Fitch Ratings
Fitch Ratings (Thailand) has today assigned a National Long-term rating of ‘AA-(tha)’ to Kasikornbank Public Company Limited’s (KBANK, ‘AA(tha)’/‘F1+(tha)’/Stable) unsecured subordinated debentures of up to THB600m, with a maturity of 10 years. The Outlook on the bank’s National rating is Stable.
The rating takes into account KBANK’s strong asset quality and capital, as well as its strong domestic banking franchise in SME, corporate and retail banking. Although its performance for 2009 could weaken due to Thailand’s sharp economic contraction, KBANK’s strong profit margins and robust capital cushion should help mitigate the impact.
KBANK’s performance in 2008 remained relatively strong, with net profits of THB15.3bn in 2008 (2007: THB15.0bn), despite a 33% yoy increase in provisioning costs. Meanwhile, the net interest margin (NIM) declined to 4.1% in 2008 (2007: 4.2%) due to lower yield on loans from declining interest rate trends. However, the bank’s performance weakened in Q109 with a net profit of THB3.8bn, down 14.4% yoy, attributed mainly to higher non-interest expense from increased personnel expenses and branch expansion, as well as increased provisioning costs to buffer against deteriorating credit conditions. Nevertheless, for Q109 the bank’s net interest income slightly improved relative to Q108, although the increase in interest incomes was partially offset by higher interest expenses resulting from increases in deposit in Q408. KBANK’s NIM declined to 3.7% in Q109, due to higher funding costs, lower loan yields and loans contraction of 3%. Nonetheless, overall profitability measures remained solid with ROA and ROE of 1.2% and 13.3%, respectively, at end-March 2009.
To date, there are few indications of significant asset quality deterioration, with KBANK’s impaired loans increasing only slightly to THB35bn or 4.0% of total loans at end-March 2009, from THB33.9bn or 3.7% of total loans at end-2008. Loan loss reserves of THB30.6bn at end-March 2009 or 87.4% coverage ratio is also relatively strong, as compared to its peers. KBANK’s funding and liquidity position is supported by its strong domestic deposit franchise. At end-March 2009, the bank’s Tier 1 capital ratio and total capital ratio stood at 10.2% and 15.6%, respectively.
Established in 1945 by the Lamsam family, KBANK is Thailand’s fourth-largest commercial bank with a 13% market share. The bank’s major subsidiaries are focused on fund management, securities, and leasing.
Contacts: Patchara Sarayudh, Bangkok, +66 2655 4761, Vincent Milton +66 2655 4759.
Disclosure: Kasikorn Asset Management Company Limited (of which KBANK holds a 100% stake) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operations of, or credit rating reviews undertaken by Fitch Ratings (Thailand) Limited.
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.
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