Bangkok--4 May--Fitch Ratings
Fitch Ratings (Thailand) has today assigned a National Short-term rating of ‘F1(tha)’ to TMB Bank Public Company Limited’s (TMB; ‘A+(tha)’/Stable/‘F1(tha)’) short-term unsecured unsubordinated debentures programme of up to THB50bn, with a maturity of no more than 270 days. The issue is being released in tranches from October 2008 to October 2011.
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. However, Fitch notes that downside risks persist due to economic growth being impacted by political instability which could result in renewed asset quality pressures.
After TMB reported a net profit of THB2.1bn and return on assets (ROA) of 0.4% in 2009, the bank continued to show improved performance in Q110 (unreviewed and unaudited accounts) with a net profit of THB0.7bn (Q109: THB0.4bn) and ROA of 0.5% (Q109: 0.3%). Although TMB’s net interest income weakened due to loan repayments, this was offset by improved non-interest income from a stronger gain on investments and fee incomes. Meanwhile, non-interest expenses declined from lower provision on foreclosed properties. Net interest margin (NIM) was relatively flat at 2.4% in Q110. TMB expects its performance for 2010 to improve on the back of stronger loan growth (target 10%) and stronger fee incomes. NIM is also expected to improve slightly from lower impaired loans and a pick-up in loan growth.
The bank’s non-performing loans (NPLs) continued to decline further to THB52.7bn or 14.6% at end-March 2010 (end-2009: THB54.4bn); while the ratio still appears high due in part to a sharp contraction in its loan book in the past two years, this should fall to about 12% following the sale of NPLs amounting to THB9.4bn in Q210. TMB’s loan loss reserve (LLR) coverage ratio, while improving, remains lower than its peers, at 58.6% at end-March 2010. Given the still-weak economy and NPL overhang, provisioning and impairment charge risks remain, which could continue to impact profitability.
At end-March 2010, TMB’s Tier 1 and total capital ratio remained strong at 12.9% and 16.4% of risk weighted assets respectively. The 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 THB560bn at end-March 2010. ING is the largest shareholder with a 30% stake, 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.