Bangkok--1 Sep--Fitch Ratings
Fitch has today affirmed the following ratings of Siam Commercial Bank Public Company Limited (SCB) ratings, as follows: - Long-term foreign currency Issuer Default Rating (IDR) at 'BBB+'/Negative Outlook;
- Short-term foreign currency IDR at 'F2';
- Individual rating at 'C';
- Support rating at '2';
- Support Rating Floor at 'BBB-';
- Foreign currency senior unsecured debt and subordinated notes at 'BBB+' and 'BBB', respectively;
- National Long-term rating at 'AA(tha)'/Stable Outlook;
- National Short-term rating at 'F1+(tha)';
- National Short-term senior unsecured debt at 'F1+(tha)'; and
- National Long-term subordinated debt at 'AA-(tha)'
SCB's ratings reflect the strength of its underlying earnings and profitability owing to it having one of the strongest retail banking franchises in Thailand, with retail loans accounting for 37% of its loan book as well as a strong presence in corporate banking. The bank's loan loss reserve and capital positions remain solid, although SCB faces rising asset quality pressure due to the weak economy. In addition, the ratings factor in the high probability of government support due to the bank's systemic importance.
Fitch notes that SCB's financial performance had declined moderately by 15% in 1H09 to THB10.8bn following a strong 2008 performance due to loan contraction and interest rate cuts. While SCB's impaired loans were relatively stable at THB49.8bn or 5.5% of total loans at end-June 2009, compared with THB50.2bn or 5.5% at end-2008, special mention loans have doubled in the past year, although this appears to have stabilised in H109. Nonetheless, Fitch expects an increase in provisioning over the next six to 12 months given that asset quality tends to lag developments in the real economy. At any rate, the agency believes that SCB's Tier 1 capital of 11.4% provides a strong buffer should economic weakness extend into 2010. Meanwhile, funding is supported by its strong domestic deposit franchise.
SCB, established under the Royal Charter in 1904, is Thailand's oldest and third-largest bank, with approximately 13% of loans and 15% of deposits at end-June 2009. The Crown Property Bureau holds a 24% stake, while the Ministry of Finance holds 23% of the bank. SCB has leading affiliates in investment banking, fund management and insurance.
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: Narumol Charnchanavivat, Bangkok, +662 655 4763; Vincent Milton, Bangkok, +662 655 4759.
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