Bangkok--21 Oct--TRIS Rating
TRIS Rating Co., Ltd. has assigned the rating to the proposed issue of up to Bt10,000 million in senior debentures of Thanachart Capital PLC (TCAP) at “A”. At the same time, TRIS Rating has affirmed the company rating and the ratings of TCAP’s current senior debentures at “A”. The outlook remains “stable”. The ratings reflect TCAP’s position as an investment holding company of Thanachart Group, its management control of Thanachart Bank PLC (TBANK) through a 50.92% ownership stake, and a stable stream of dividends from TBANK. The ratings take into consideration the capable management team, improvement in the risk management system, a strong capital base, and a strong business and financial support from its strategic partner -- Bank of Nova Scotia (BNS). In addition, the widen scope of its banking businesses with its growing numbers of branches will strengthen the group’s market position, business diversification and financial performance in the future. However, these strengths are constrained by an unfavourable economy, plus competition and uncertainty in the banking, hire purchase, and securities industries. These factors might limit the group’s profitability and business expansion.
The “stable” outlook reflects the expectation that TBANK, as the major source of revenue for TCAP, will continue to generate stable earnings for the company. In addition, strong financial support and business know-how from both strategic partners -- BNS and TCAP -- will enhance TBANK’s overall business performance. The company’s financial performance is expected to improve in the future. Future growth, both organic and inorganic, through acquisitions or joint venture between TCAP and BNS will be possible. The solid capital base and adequate liquidity is also crucial to help mitigate future downside risks during economic uncertainty.
TRIS Rating reported that as of June 2009, on a consolidation and normalized earnings basis, TCAP received 61% of total revenue contribution from TBANK, while the other 28% was from insurance businesses. The remaining 7% were from TCAP’s own operation and asset management companies, including Max Asset Management Co., Ltd. (MAX) and NFS Asset Management Co., Ltd. (NFS-AMC). Revenues from securities and fund management businesses accounted for 4% of TCAP’s total revenue. Based on consolidated asset size as of June 2009, TCAP is ranked eighth among all 12 Thai universal banks, with a 4.7% market share in loans and in deposits. TCAP has developed a proficient management team that has enabled the company to support the competitive position of its subsidiary and allow TCAP to remain flexible in response to changes in the economic and business environments. The company’s consolidated risk management framework has improved continuously to comply with international standards. However, the economic uncertainty and high competitive environment in the banking industry are expected to limit growth and profitability of TBANK and TCAP over the next one to two years.
TRIS Rating said, TBANK, currently operates under a universal banking license. As part of the group’s reorganization plan, in 2007, TBANK bought eight subsidiaries from TCAP. In July 2007, TCAP signed a joint venture agreement with BNS for the investment in TBANK, changing TBANK’s shareholding structure. TCAP’s shareholding in TBANK was reduced from 99.36% to 74.92% as of 19 July 2007; the balance of 24.98% was held by BNS. On 3 February 2009, TCAP sold additional shares of TBANK to BNS in accordance with the shareholder agreements. The sale covered 416,526,737 shares at Bt18.38 per share (1.6 times book value per share), worth Bt7,656 million. TCAP booked gain from sale of investment for Bt2,800 million. This transaction increased BNS’s shareholding in TBANK up to 48.99% while TCAP held 50.92% of TBANK. TBANK has a well-balanced revenue base from interest and non-interest income, in line with its universal banking platform. Interest income accounted for 59% of total revenue, mainly from TBANK’s market leading position in hire purchase business. The insurance businesses contributed the largest portion of non-interest income. These businesses will post a significant growth in the future as net insurance income for the first half of 2009 was amounting to Bt905 million or accounted for 18% of TCAP’s earnings before taxes. This helps sustain profitability when the bank needs to set aside higher provisioning during the economic slowdown period. -- End
Thanachart Capital PLC (TCAP)
Company Rating: Affirmed at A
Issue Ratings:
TCAP103A: Bt4,000 million senior debentures due 2010 Affirmed at A
TCAP105A: Bt2,500 million senior debentures due 2010 Affirmed at A TCAP11NA: Bt1,500 million senior debentures due 2011 Affirmed at A Up to Bt10,000 million senior debenture due 2014 ARating Outlook: Stable