Bangkok--3 Aug--Fitch Ratings
Fitch Ratings has today affirmed Bangkok Bank Public Company Limited’s (BBL) Long-term foreign currency Issuer Default Rating (IDR) at ‘BBB+’ with a Negative Outlook, Short-term foreign currency IDR at ‘F2’, foreign currency subordinated debt rating at ‘BBB’, Individual Rating at ‘C’, Support Rating at ‘2’, Support Rating Floor at ‘BBB-’, National Long-term Rating at ‘AA(tha)’ with Stable Outlook, National Short-term Rating at ‘F1+(tha)’, National subordinated debt rating at ‘AA-(tha)’
BBL’s affirmed ratings are based on its strong franchise, solid capital and liquidity. The ratings also factor in the high probability of government support given BBL’s systemic importance. Fitch however notes that profitability and asset quality could be impacted in 2009 due to the severe global economic contraction.
BBL’s performance in 2008 improved slightly from 2007 with consolidated net income of THB20.3bn, a 5.2% yoy increase. Revenue rose, in line with strong growth in large and medium-sized corporate lending in H108, although this was largely offset by increased provision and operating expenses. The bank’s net interest margin (NIM) and return on assets, while gradually improving, still lag behind those of its major rivals due mainly to a larger proportion of lower-yielding large corporate loans. H109 net income amounted to THB9.8bn, 8.7% lower yoy, with loans contracting by 6.4% YTD. NIM declined in H109 to 3.2% (H108: 3.5%).
At end-2008 BBL’s impaired loans fell to 4.7% of total loans from 7.9% at end-2007 due mainly to debt restructuring (of large corporate customers). Impaired loans have increased slightly, to THB57.6bn in H109 (end-2008: THB55.1bn). In addition, restructured loans account for about 11% of total loans. BBL’s loan loss reserves has risen to 109.5% of impaired loans, currently the highest among its peers, although provisioning risks remain given the renewed pressure on asset quality.
BBL has a strong domestic funding base and loan to deposit (plus short-term borrowing) ratio of 73.6% at end-June 2009. The bank’s capital position also remains strong with Tier 1 ratio and total capital ratio of 12.9% and 15.8%, respectively, at end-June 2009. Equity to asset stood at 10.3% as end-March 2009.
The Outlook is Negative as there is a risk of prolonged economic contraction into 2010. This could impact the bank’s asset quality, profitability and possibly capital. Mitigating these risks are the bank’s strong capital and liquidity buffers.
BBL is the largest bank in Thailand, with a 16.5% share of loans and 20.1% of deposits at end-March 2009. It was established in 1944 by the Sophonpanich family, whose stake has fallen significantly since the country’s 1997 financial crisis. The bank’s ownership is now widely dispersed, with foreign (mainly institutional) shareholders accounting for about 49%. BBL has 916 domestic and 19 offshore branches, mainly in Asia, as well as affiliates in securities, insurance and fund management. Regional loans account for about 16% of total loans.
Contacts: Narumol Charnchanavivat, Bangkok, +662 655 4763; Vincent Milton, +662 655 4759.