Bangkok--16 Mar--Fitch Rates
Fitch Ratings (Thailand) has today assigned an ‘A(tha)’ National Long-term rating to TMB Bank Public Company Limited’s (TMB; ‘A+(tha)’/Stable/‘F1(tha)’) subordinated unsecured debentures of up to THB8bn, with a maturity of 10 years.
TMB’s ratings reflect the improvement in its capital after a recapitalisation by ING Bank NV (ING; ‘A+’/Stable/‘F1+’) in December 2007. The outlook for the bank should improve in 2010 on the back of a recovery in economic growth and the bank’s refocus on business growth as it completes its integration with ING. Fitch notes though that downside risks persist due to a still-weak economy and asset quality overhang.
TMB’s performance in 2009, although improving, remained weak with a small net profit of THB2.1bn and ROA of 0.4%, mainly due to lower interest revenues from further loan book contraction (down 13.7% from end-2008) and a sharp increase in impairment charges from the sale of foreclosed properties in Q209. TMB’s provision declined to 0.7% of average loans in 2009 (2008: 1.1%) as its internal qualitative review neared completion. TMB’s net interest margin (NIM) narrowed to 2.5% in 2009 (2008: 2.9%) given a shrinking loan book and higher proportion of liquid and low yielding assets. NIM should improve in 2010 with a further fall in impaired loans and a pick-up in loan growth.
TMB’s NPLs declined sharply to THB54.4bn at end-2009 (end-2008: THB70.6bn) on the back of THB15bn NPL sales, although the NPL ratio remained relatively high at 14.8% at end-2009 (end-2008: 16.5%). TMB’s loan loss reserve (LLR) coverage ratio remains lower than its peers, at 57.3% at end-2009. Given the still-weak economy and NPL overhang, provisioning and impairment charge risks remain, which could continue to impact profitability.
At end-2009, TMB’s Tier 1 and total capital ratio improved to 12.3% and 17.1%, respectively, of risk-weighted assets from 10.1% and 13.9%, respectively, of risk-weighted assets at end-2008, primarily from a lower level of risk assets resulting from shrinking loan books and an issuance of THB5.3bn subordinated debts in Q409. TMB’s strong capital level should provide a reasonable buffer against the weak operating environment and enable TMB to absorb any additional provisioning.
TMB is the sixth-largest commercial bank in Thailand with assets of THB543.6bn at end-2009. ING is the largest shareholder at 30%, followed by the Ministry of Finance at 26% and Singapore’s DBS Bank at 7%. Fitch considers the probability of external support from the Thai government, if needed, to be moderate.
Application criteria available on Fitch’s website at www.fitchratings.com: “Global Financial Institution Criteria” dated December 29, 2009; and “National Rating-Methodology Update” dated December 18, 2006.
Contacts: Patchara Sarayudh, Bangkok, +662 655 4761; Vincent Milton, +662 655 4759.