Bangkok--19 Apr--Fitch Ratings
Fitch Ratings has today assigned a ‘A-(tha)’ National Long-term rating to TISCO Bank Public Company Limited’s (TISCOB) subordinated and unsecured debentures of up to THB1.0bn due 2020. The Outlook on the bank is Stable.
The ratings reflect TISCOB’s strong profitability, asset quality, and capital, although it is more vulnerable to funding and liquidity pressures than larger banks. The Outlook for the rating is Stable based on the expected maintenance of strong profitability, asset quality, and capital, although TISCOB has weaker funding and liquidity position compared to larger peers.
TISCOB’s reliance on large depositors, which account for about 77% of total deposits (including bills of exchange; B/Es) and mainly short-term liabilities, make it more vulnerable during periods of systemic distress. However, the three year extension of a full deposit protection for the Thai banking industry in 2008 should help TISCOB maintain funding stability over the next few years. TISCOB also intends to diversify its funding base to retail depositors over the next few years. At end-2009, TISCOB’s retail deposits base improved to about 23% of total deposits from 13% at end-2008. Moreover, TISCOB expects its retail deposits base to improve further to about 35% of total deposits by end-2010.
For 2009, TISCOB’s performance was resilient with net interest income improving to THB5.5bn from THB4.3bn in 2008. Its net interest margin (NIM) widened to 4.5% (2008: 4.1%), due mainly to loan growth (up 7.4% yoy) and lower funding costs. As a result, TISCOB reported higher net profit of THB1.4bn (2008: THB1.2bn). Return on assets (ROA) was unchanged at 1.1% from 2008, and return on equity (ROE) rose to 12.5% from 12.1% in 2008.
The bank’s impaired loans declined modestly to THB2.5bn at end-2009 (end-2008: 2.6bn) or 2.3% of total loans. However, its provisions rose to THB1.2bn or 1.1% of loans in 2009 (2008: THB0.7bn or 0.8% of loans) as a buffer against downside risks. As a result, TISCOB’s loan loss reserve (LLR) coverage ratio jumped to 84.8% at end-2009 from 62.5% at end-2008.
While TISCOB's capital ratios remain high, they have fallen significantly in the past few years due to high dividend payouts and asset growth. The implementation of the Basel II Internal Rating Based (IRB) approach at end-2009 resulted in Tier 1 capital rising to 12.5% from 10.4% at end-2008, on the back of lower risk weighting on consumer loans. The bank’s total capital ratio rose significantly to 16.96% from 11.71% due to the issuance of THB4bn subordinated debt in 2009, although the bank’s equity/assets ratio declined to 8.6% from 9.3% at end-2008.
TISCOB was established in 1969 as a finance company and changed its status to that of a commercial bank in July 2005. After the group’s restructuring in December 2008, TISCOB is now a major subsidiary of TISCO Financial Group Public Company Limited (TISCOFG), and has a strong niche position in the car hire purchase business.
Disclosure: TISCO Asset Management Company Limited (of which TISCO Financial Group Public Company Limited holds 100%) 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.
Application criteria available on Fitch’s website at www.fitchratings.com: “Global Financial Institutions 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.
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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