Bangkok--2 Jun--Fitch Ratings
Fitch Ratings (Thailand) has today assigned an ‘AA-(tha)’ Long-term National rating to Kasikornbank Public Company Limited’s (KBANK, ‘AA(tha)’/‘F1+(tha)’/Stable) unsecured subordinated debentures (No. 1/2553) of up to THB7.5bn with a maturity of 10 years (callable).
The rating takes into account KBANK’s strong asset quality and capital, as well as its strong domestic banking franchise in SMEs, corporate and retail banking. Although KBANK’s performance and asset quality for 2010 could weaken as Thailand’s economic growth is affected by the country’s political instability, the bank’s strong profit margins and robust capital cushion should help to mitigate the impact.
KBANK’s performance in 2009 remained resilient, despite Thailand’s sharp economic contraction. The bank reported a modest decline in net profit to THB14.9bn and return on assets (ROA) of 1.2% (2008: THB15.3bn and 1.4%, respectively). While KBANK’s pre-provision operating profit was stable at THB30.5bn in 2009, provisioning costs increased to THB9.4bn or 1.1% of loans (2008: THB7.8bn or 0.9% of loans) due to higher impaired loans. For Q110 loans expanded by 8.2% (annualised). KBANK’s net interest margin (NIM) declined to 3.7% in 2009 (in 2008: 4.1%), due mainly to a sharp rise in lower yielding investments in government and state-enterprise bonds and declining trend in interest rates. For Q110, KBANK reported stronger performance with net profit of THB4.7bn (before minority interest) and ROA of 1.4% (Q109: THB3.8bn and 1.2%, respectively) due mainly to lower funding costs and provisions. NIM was stable at 3.8% in Q110.
KBANK’s NPLs increased to THB37.3bn or 4.0% of loans at end-2009 (2008: THB33.9bn or 3.7% of loans), due mainly to deteriorating economic conditions in 2009. At end-March 2010, the bank’s impaired loans declined modestly to THB36.7bn or 3.8% of loans. Nonetheless, asset quality risks remain given the time lag and still weak economic conditions. KBANK’s loan loss coverage ratio of 96.1% at end-March 2010 remained strong compared with its local peers. KBANK’s funding and liquidity position is supported by its strong domestic deposit franchise. Capital ratios remain strong with Tier 1 at 10.1% and total capital at 15% of risk-weighted assets at end-March 2010.
Established in 1945 by the Lamsam family, KBANK is Thailand’s third-largest commercial bank with a 16% market share (as of end-2009). The bank’s major subsidiaries are focused on fund management, securities, factoring, leasing and insurance. KBANK increased its stake in Muang Thai Life Assurance in 2009 to 38.3% from 7.5%. KBANK’s ownership is now widely dispersed with foreign, mainly institutional, shareholders holding a 49% stake. The Lamsam family still retains management positions and representation in the board of directors.
Disclosure: Kasikorn Asset Management Company Limited (of which KBANK holds a 100% stake) owns 10% of the shares in Fitch Ratings (Thailand) Limited. Muang Thai Life Assurance Company Limited (of which KBANK holds a 38.3% economic interest) 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 operations of, or credit rating reviews undertaken by Fitch Ratings (Thailand) Limited.
Applicable 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, Vincent Milton, Bangkok, +662 655 4761/4759.
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.
Additional information is available at www.fitchratings.com.
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