Bangkok--30 Oct--Fitch Ratings
Fitch Ratings has today assigned CIMB Thai Bank Public Company Limited (CIMBT) the following ratings: National Long-term 'A+(tha)' with Stable Outlook, National Short-term 'F1(tha)', Long-term foreign currency Issuer Default Rating (IDR) of 'BBB-' with a Stable Outlook, Short-term foreign currency IDR 'F3', Individual 'D' and upgraded the Support rating to '2' from '3'. Fitch has also assigned CIMBT's upper tier 2 debt issued in March 2009 of THB2.5bn with a maturity of 10 years a National rating of 'A-(tha)'.
The upgrade of the Support rating reflects increased support from new majority shareholder CIMB Bank Berhad (CIMB, 'BBB+'/Stable) through a capital injection and management control as well as direct name association with its parent following its acquisition in January 2009. Such operational and financial support should help improve CIMBT's financial performance and capital position in the medium term. Given CIMB's near-full ownership, management control and direct name association, Fitch expects a high probability of shareholder support, if needed. Any change in the shareholding structure that could weaken the support is likely to affect the bank's ratings. The Stable Outlook reflects that of its parent and expectation of continued strong support. The National rating of CIMBT's upper tier 2 debt security is two notches below the bank's National Long-term rating due to strong parent support of payment of coupon obligations even in the event of a loss.
Following large losses in the past two years due to CDO charges and provisioning expenses, CIMBT returned to a small net profit in Q309. While full-year performance is expected to remain weak, the bank's performance should improve in the next one to two years as loan growth picks up and the bank completes its integration with its parent.
CIMBT's asset quality remains weaker than that of its peers, with an NPL ratio at end-September 2009 of 16.5% (versus 14.4% at end-2008), although this is partly due to loan book contraction. In absolute terms, NPLs remained at THB13.4bn. Reserve coverage is moderately lower than the industry average, at 60% of NPLs at end-September 2009, although this is expected to be strengthened gradually.
Loan to deposit ratios are relatively low as lending had been constrained by a weak capital base. Funding and liquidity risks should also be mitigated by CIMB's support. CIMBT has downsized its deposit base and plans to reposition its deposit structure to reduce funding costs.
Following CIMB's acquisition in January 2009, CIMBT raised THB2.5bn of new capital - mostly from the parent - through a rights issue and in March issued THB2.5bn hybrid upper tier 2 debt to strengthen its capital. However, the bank's tier 1 ratio at end-September 2009 was 6.7% which is weaker than the industry's average of 11%, while its total capital was 13.2%.
CIMBT, formerly known as Bank Thai (BT), was formed in 1998 as a result of a government-initiated merger of several defunct financial institutions. The Financial Institutions Development Fund (FIDF) acquired a majority stake in BT after the merger, with a 96.32% shareholding in 2000, which was later reduced to 48.98%. In November 2008, CIMB acquired the FIDF's stake in BT and subsequently made a tender offer for the remaining shares from minority shareholders including TPG Newbridge, and currently holds a 93.15% stake.
Contacts: Narumol Charnchanavivat, Bangkok +662 655 4763; Vincent Milton, +662 655 4759.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected].
Additional information is available on www.fitchratings.com.