Bangkok--9 Sep--Fitch Ratings
Fitch Ratings has today affirmed Krung Thai Bank Public Company Limited's (KTB) ratings, as follows: Long-term foreign currency Issuer Default Rating (IDR) at 'BBB' with a Stable Outlook;
Short-term foreign currency IDR at 'F3';
Individual at 'C/D';
Support at '2';
Foreign currency subordinated debt rating at 'BBB-';
Support Rating Floor at 'BBB';
Foreign currency offshore hybrid Tier 1 securities at 'BB';
National Long-term rating at 'AA+(tha)' with Stable Outlook;
National Short-term rating at 'F1+(tha)';
National subordinated debt rating at 'AA(tha)';
National rating on domestic hybrid Tier 1 securities at 'A(tha)';
Fitch notes that KTB's ratings are underpinned by strong government ownership and support, as well as its improving financial strength, even though downside risks to KTB's performance persist. KTB is Thailand's second-largest bank (17% market share), with the Bank of Thailand's (BOT) Financial Institutions Development Fund (FIDF) holding a 55%-stake. Given KTB's size and importance to the financial system and economy, as well as its majority state-ownership and control, the agency believes there is a high probability KTB would receive state support, if needed. Although government ownership and control provide support to the long-term debt ratings, these factors could weaken the bank's stand-alone financial performance due to its support of government policies.
In 2008, KTB's financial performance improved significantly primarily due to lower provisions. However, the bank's performance and asset quality could weaken in 2009 in light of Thailand's severe economic downturn. Fitch projects a negative 3.1% GDP growth for Thailand in 2009, with a modest recovery to 3.0% by 2010. KTB reported a net profit of THB12.3bn (up 92.2% yoy) in 2008, despite additional charges of THB2.4bn against CDO investments. A pick-up in loan growth (9.2% yoy) and lower funding costs helped maintain the net interest margin (NIM) at 3.9%. As for H109, KTB's net profit declined to THB5.2bn (down 14% yoy) due to a sharp decline in dividend income from the Vayupak Fund and higher non-interest expense, although provisioning surprisingly fell. The NIM fell to 3.4% due to fall in interest rates and an increase in low-yielding interbank loans. KTB's ROA and ROE stood at 0.8% and 10.1%, respectively in H109.
In H109, KTB reported strong loan growth of 4.3% from end-2008 or 8.6% on an annualised basis compared with reported negative loan growth for the other major Thai banks, although majority of the loan growth were loans to government agencies. KTB's impaired loans decreased to THB86bn (8.1% of total loans) at the end of 2008 due to THB13.6bn of write-offs, while NPLs rose moderately to THB88.7bn (or 8.1% of total loans) as of end-June 2009. Reserve coverage ratio at end-June 2009 remained low (41.2%), implying a risk of a jump in provisioning in the next six to 12 months, particularly given the weak economic environment.
KTB's funding and liquidity remained stable as it has one of Thailand's strongest local deposit franchises as state enterprises and government employees deposit their savings mainly with KTB. The bank's loan-to-deposit and liquid assets ratio stood at 88% and 26.1%, respectively at end-June 2009. KTB's capital ratios also appear strong with a Tier 1 of 9.8% and total capital ratios of 15.5% at end-June 2009. However, high asset growth to support government economic stimulus and higher provisions may cause the capital ratios to fall in the next few years.
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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