Bangkok--12 Apr--Fitch Ratings
Fitch Ratings has today affirmed the Support ratings of Thailand's Bank for Agriculture and Agricultural Cooperatives (BAAC), Government Housing Bank (GHB), and Government Savings Bank (GSB) at '2'. The agency believes there is a high probability that state support would be forthcoming, if necessary, given these banks' government ownership and public policy roles. Accordingly, any changes in the level of government ownership or support could affect the Support ratings.
BAAC, with assets of THB677.6bn at end-September 2009, is the largest rural finance lender in Thailand. BAAC's performance in H109 (to end-September 2009) weakened with lower net profit of THB4.0bn (H108: THB4.4bn). This was due mainly to lower interest income from lower compensation from government projects affected by the change in project structures, as well as from lower revenues from inter-bank assets. Net interest margins (NIM) declined to 4.1% in H109 (FY08: 5.4%) due to a jump in low-yielding government projects receivables (17% of total assets). Impaired loans rose to THB51.5bn, or 9.8% of loans, at end-September 2009 (2008: THB35.5bn or 7.3% of loans) due to a weaker domestic economy in 2009. The bank however expects NPLs to decline by year-end (to end-March 2010) on the back of the Thai government's support for agricultural product pricesm, and amid improved economic conditions. BAAC's Tier 1 capital ratio dropped to about 11.1% at end-September 2009 (FY2008: 13.6%) from higher risk assets given strong loan growth (up 7.4% YTD).
GHB, with assets of THB663.8bn, is the largest provider of mortgage finance in Thailand, mainly to lower-to-middle-income borrowers, with a market share of about 38%. GHB's 2009 performance improved significantly with net profit of THB5bn, 52% higher yoy, from lower provisioning costs, and increased lending with loan growth of 5% yoy. GHB's asset quality deteriorated in 2008 with gross NPL rising to THB84.3bn (13.6% at end-2008) from THB52.5bn at end-2007 given the weak domestic economy and more conservative loan reclassification; NPL coverage also declined despite higher provisions in 2008. As at end-2009, NPL declined to THB80.7bn from active loan collection. Total capital ratio of 11.97% at end-September 2009 (2008: 11.33%) appears adequate, while equity to asset ratio improved to 5.3% at end-September 2009 (end-2008: 4.4%) following the government's capital injection of THB3bn in September 2009 to support asset growth.
GSB, with asset of THB949.5bn at end-September 2009, is the principal government-owned savings institution. GSB's performance for the nine-month period to end-September 2009 (9M09) remained strong with net profit of THB11.5bn (up 7% yoy), although this was due mainly to lower provisions. The bank's loans increased significantly in 9M09 (up 28% from end-2008), from its support role for the government's economic stimulus plan. At end-September 2009, the bank's NPLs rose to THB19.4bn, mainly as a result of higher NPLs from mortgages; however the NPL ratio declined to 2.8% (end-2008: 4.9%) as loans increased. Despite GSB's lower capital ratios resulting from strong loan growth, GSB's Tier 1 capital ratio remained strong at 15% at end-September 2009 (end-2008: 19.7%).
Applicable criteria available on Fitch's website, at www.fitchratings.com: "Global Financial Institution Criteria" dated December 29, 2009.
Contacts: Patchara Sarayudh, Narumol Charnchanavivat, Vincent Milton, Bangkok, +66 2 655 4755.
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.
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