Bangkok--1 Oct--Fitch Ratings
Fitch Ratings (Thailand) has today assigned a National Short-term rating of ‘F1+(tha) to Standard Chartered Bank (Thai) Public Company Limited’s (SCBT) unsecured, unsubordinated debenture programme of up to THB40bn with a maturity of no more than 270 days. The issue is being released in several tranches from December 2008 to December 2011. The bank’s National Long-term rating is ‘AA+(tha)’ with a Stable Outlook.
SCBT’s ratings reflect the bank’s strong financial position and strong support from its controlling shareholder, Standard Chartered Bank (SC, ‘A+’/Stable Outlook). SC’s 99.97% stake is intended as a long-term strategic holding and the bank exercises control of SCBT’s board and management.
SCBT’s capital-raising of THB7.2bn in May 2009 from SC should provide a strong capital base for business growth and also help minimise potential ownership dilution as, from September 2009, it is subject to foreign ownership restrictions on further capital-raising. In the longer-term, SCBT may have to depend on retained earnings, asset distribution and tier 2 capital to mitigate the dilution of SC’s shareholding level. Given SC’s reputation and resources, Fitch believes there would be a high probability of shareholder support for SCBT, if required.
SCBT reported a small unconsolidated net profit of THB0.2bn for H109, due to a jump in provisioning against corporate loan impairments. The weak performance for H109 was also due to a sharp decline in non-interest income to THB0.8bn in H109 (H108: THB2.4bn) as revenue from exchange and derivative contracts fell 66% yoy on much lower business volumes and lower market volatility in H109. Net interest revenue also declined moderately to THB3.5bn in H109 (H108: THB3.9bn), mainly due to lower interest revenue from interbank loans resulting from a low interest-rate environment. SCBT’s net interest margin dropped further to 2.6% in H109 (2008: 3.2%), due to increased low-yield interbank and mortgage lending, while high-yield unsecured personal loans continued to decline.
SCBT’s impaired loans increased sharply to THB3.1bn at end-June 2009 (end-2008: THB2.1bn), due to higher corporate loan impairments. However, SCBT’s impaired loan ratio of 4.5% remains among the lowest in the industry. The bank’s loan loss reserve coverage ratio of 119.5% at end-June 2009 is the strongest in Thailand, although, given the still weak economic conditions and the bank’s large exposure to volatile unsecured consumer loans (24% of total loans at end-June 2009), provisioning risks remain. SCBT recently filed a law suit against state-owned SME Bank for an alleged breach of a derivative contract, although the bank expects no provisioning.
Funding and liquidity remains strong. SCBT’s capital ratios are also strong with tier 1 and total capital ratio of 18.8% and 19.2%, respectively, at end-June 2009.
Formerly Nakornthon Bank, SCBT was established in 1933 by the Wanglee family. The bank was nationalised following the 1997 financial crisis and was later acquired by SC. SCBT currently ranks as the eight-largest Thai commercial bank with a market share of about 2%.
Contacts: Patchara Sarayudh, Vincent Milton, Bangkok, +662 655 4761/4759.