Bangkok--1 Dec--Fitch Ratings
Fitch Ratings has today revised the international ratings' Outlooks of the four largest private Thai banks ("the four banks"), namely Bangkok Bank Public Company Limited (BBL), Siam Commercial Bank Public Company Limited (SCB), Kasikornbank Public Company Limited (KBANK), and Bank of Ayudhya Public Company Limited (BAY), to Stable from Negative. TMB Bank Public Company Limited (TMB)'s international ratings remain on Negative Outlook. A list of rating actions is detailed below.
The Outlook change reflects the resilient performance of the four banks for 9M09, despite a significant decline in Thailand's GDP. Their combined return on assets (ROA) fell modestly to 1.26% in 9M09 (2008: 1.32%), much stronger than Fitch's conservative forecast at the start of the year, due to only a modest increase in provisioning costs, though loan growth slowed more sharply than expected. While Fitch believes the risk of a further increase in provisioning remains in the next six to 12 months due to time lags and a higher relapse on restructured and rescheduled loans, these banks' performance will likely remain resilient as the economic outlook improves. However, TMB's performance remains poor due to weaker asset quality and significant loan contraction, with the bank reporting negligible profits in 9M09.
For the four banks, asset quality deterioration appears to be contained, with the combined NPLs of these banks rising modestly to 5.8% of loans at end-September 2009 from 5.5% at end-2008. Nonetheless, asset quality risks persist, given the significant increase in the special-mention loans (SML) for the banking sector in 2008 which could translate into a further rise in NPLs. While stabilising, economic conditions remain weak and could cause NPLs to rise in the next year as asset quality tends to lag improvements in the real economy. TMB's impaired loans declined in 9M09, mainly due to the NPL sales of THB14.9bn, although NPL ratio remained high at about 16% as its loan book shrank further by 14.8% from end-2008. TMB's SML remained the highest in the sector at about 14% of total loans, in part due to qualitative reclassification following the entry of ING as a strategic shareholder. Exposure to Dubai-related entities for the Thai banks is generally insignificant.
Fitch's stress tests indicates that BBL, SCB, KBANK and BAY should be able to withstand a high stress scenario with their strong profit margins, high level of excess reserves and capital which are expected to help offset any increase in provisioning costs. Hence, the capital impact should be moderate. However, in a high stress scenario, TMB could be vulnerable to significant capital depletion due to its weaker profitability, lower coverage ratio, and higher level of NPLs and SMLs.
The four banks' loans at end-September 2009 showed a decline of over 3%. Fitch expects to see assets growing again in 2010, although the rate is likely to be modest. Average net interest margin (NIM) fell to 3.6% in 9M09 from 3.9% in 2008 due to a fall in yield and loan contraction. SCB, KBANK and BBL continued to show the strongest performances with only a moderate decline in net profits for 9M09 and the highest ROAs. BAY also reported robust revenues and margins, driven by acquisitions of higher-yielding retail banking assets from its strategic shareholder, GE Capital, although provisioning costs remain higher than the other banks due to its lower reserve coverage ratio.
The four banks' liquidity position generally remained stable, with a moderate loans/deposits ratio at around 92% at end-September 2009. Moreover, the four banks are also strongly capitalised with average tier 1 and total capital ratios of 12.2% and 16.1%, respectively at end-September 2009. This should provide a strong buffer against any further deterioration in asset quality, should the economic recovery remain weak in the next one to two years.
Bangkok Bank Public Company Limited (BBL):
Long-term foreign currency IDR affirmed at 'BBB+'; Outlook changed to Stable from Negative
Short-term foreign currency IDR affirmed at 'F2'
Individual rating affirmed at 'C';
Support rating affirmed at '2'
Foreign currency subordinated debt affirmed at 'BBB'
Support Rating Floor affirmed at 'BBB-'
National Long-term rating affirmed at 'AA(tha)'; Outlook Stable
National Short-term rating affirmed at 'F1+(tha)'
National subordinated debt affirmed at 'AA-(tha)'
Siam Commercial Bank Public Company Limited (SCB):
Long-term foreign currency IDR affirmed at 'BBB+'; Outlook changed to Stable from Negative
Short-term foreign currency IDR affirmed at 'F2'
Individual rating affirmed at 'C';
Support rating affirmed at '2'
Foreign currency senior unsecured debt affirmed at 'BBB+'
Foreign currency subordinated debt affirmed at 'BBB'
Support Rating Floor affirmed at 'BBB-'
National Long-term rating affirmed at 'AA(tha)'; Outlook Stable
National Short-term rating affirmed at 'F1+(tha)'
National Short-term senior unsecured debt affirmed at 'F1+(tha)'
National Long-term subordinated debt affirmed at 'AA-(tha)'
Kasikornbank Public Company Limited (KBANK):
Long-term foreign currency IDR affirmed at 'BBB+'; Outlook changed to Stable from Negative
Short-term foreign currency IDR affirmed at 'F2'
Individual rating affirmed at 'C';
Support rating affirmed at '2'
Long-term foreign currency subordinated debt affirmed at 'BBB'
Support Rating Floor affirmed at 'BBB-'
National Long-term rating affirmed at 'AA(tha)'; Outlook Stable
National Short-term rating affirmed at 'F1+(tha)'
National Long-term senior unsecured debt affirmed at 'AA(tha)'
National Short-term senior unsecured debt affirmed at 'F1+(tha)'
National Long-term subordinated debt affirmed at 'AA-(tha)'
Bank of Ayudhya Public Company Limited (BAY):
Long-term foreign currency IDR affirmed at 'BBB'; Outlook changed to Stable from Negative
Short-term foreign currency IDR affirmed at 'F3'
Individual rating affirmed at 'C';
Support rating affirmed at '3'
Foreign currency subordinated debt affirmed at 'BBB-'
Support Rating Floor affirmed at 'BB+'
National Long-term rating affirmed at 'AA-(tha)'; Outlook Stable
National Short-term rating affirmed at 'F1+(tha)'
National subordinated debt affirmed at 'A+(tha)'
TMB Bank Public Company Limited (TMB):
Long-term foreign currency IDR affirmed at 'BBB-'; Outlook Negative
Short-term foreign currency IDR affirmed at 'F3'
Individual rating affirmed at 'C/D';
Support rating affirmed at '3'
Foreign currency subordinated debt affirmed at 'BB+'
Foreign currency Tier 1 hybrid affirmed at 'B'
Support Rating Floor affirmed at 'BB+'
National Long-term affirmed at 'A+(tha)'; Outlook Stable
National Short-term affirmed at 'F1(tha)'
National subordinated debt affirmed at 'A(tha)'
For further information, please see newly released report, "Thai Banks: 9M09 Results and Outlook - Strong Buffer to Absorb Downside Risks in 2010", on www.fitchratings.com.
Contacts: Patchara Sarayudh, Narumol Charnchanavivat, Vincent Milton, Bangkok, Tel: +66 2 655 4755.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email:
[email protected].
Disclosure: Kasikorn Asset Management Company Limited (of which KBANK holds 99.99%) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operation of, or credit rating reviews undertaken by Fitch Ratings (Thailand) Limited.
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.
Additional information is available at www.fitchratings.com.
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