TRIS Rating Co., Ltd. has affirmed the company and the current senior debenture ratings of Ayudhya Capital Auto Lease PLC (AYCAL) at “A+”. At the same time, TRIS Rating has also assigned the “A+” rating to AYCAL’s proposed issue of up to Bt3,000 million in senior debentures. The outlook remains “stable”. The ratings reflect an enhancement from AYCAL’s stand-alone rating as it is a core strategic subsidiary of its parent company, Bank of Ayudhya PLC (BAY). BAY is rated “AA-” with a “stable” outlook by TRIS Rating. AYCAL is BAY’s core subsidiary in the automobile hire purchase business, which helps fulfill BAY’s universal banking services. AYCAL’s stand-alone rating is based on the company’s strong market position in the automobile and motorcycle hire purchase businesses, experienced management team with a proven track record, and its good risk management system. However, these strengths are partially offset by an intense competition in automobile and motorcycle hire purchase businesses and uncertainty in changing operating environment, which may pressure AYCAL’s business expansion, financial performance, and asset quality in the future.
The “stable” outlook reflects the expectation that AYCAL’s business direction continues to closely align with BAY Group’s business strategy, and the company continues to get strong support from BAY. The outlook also considers the ability of the management team to sustain strong market position in the auto and motorcycle hire purchase businesses. With experienced management, good risk management system, and strong support from BAY, TRIS Rating expects the company would be able to maintain assets in good quality and improve the financial performance in the medium term.
TRIS Rating reported that AYCAL became BAY’s wholly-owned subsidiary in February 2008, following BAY’s business reorganization after GE Capital International Holdings Corporation (GECIH) purchased a 32.93% stake in BAY. AYCAL’s total receivables as of December 2010 accounted for 18% of BAY’s consolidated loan outstanding (up from 16% in 2009). Net income of AYCAL for 2010 contributed 35% to BAY’s consolidated net income for the same period (up from 30% in 2009). Business and financial supports from BAY are expected to further enhance AYCAL’s market position in its core businesses and improve its financial flexibility. AYCAL is one of the subsidiaries getting priority from BAY’s financial supports, as reflected in the proportion of outstanding amount of lending from BAY to AYCAL at 54% of BAY’s total lending to subsidiaries as of December 2010 (up from 51% as of December 2009).
TRIS Rating said, AYCAL is a sole subsidiary for BAY’s auto loan business, under the name “Krungsri Auto”. The company provides hire purchase financing for the purchase of new cars, used cars, and motorcycles, and also renders secured personal loans services through auto sales and lease back, under the brand “Car4Cash”. The company is the second largest among 20 auto hire purchase operators in TRIS Rating’s database, with Bt109 billion of outstanding loans. Also, the company becomes the second largest motorcycle hire purchase operator, having outstanding loans of Bt4.6 billion as of December 2010.
With almost 20 years of experience in the industry, AYCAL has developed a proficient management team and business platform that have enabled the company to compete successfully. AYCAL has applied the risk management model from its parent company’s practice. Both AYCAL and BAY, therefore, are regulated under the same standard criteria set by the Bank of Thailand. Due to prudent credit risk management and an efficient collection system, AYCAL has good asset quality, despite its high risk portfolio. As of December 2010, non-performing loans (NPL), defined as delinquent loans with more than three months pass due to average hire purchase loans, declined to 1.45% from 1.47% in 2009 and 2.2% in 2008. This figure is considered lower than an average NPL ratio of about 1.7% for seven commercial bank-based operators in TRIS Rating’s database.
The company reported a net interest income of Bt7,347 million in 2010, or 20% higher than the amount of Bt6,129million in 2009. Profitability continued to improve in 2010, supported mainly by an increase in average interest spread to 6.09% in 2010 from 5.57% in 2009, and lower losses in sales of repossessed vehicles. Net income was Bt3,103 million, up by 57% from Bt1,980 million in 2009. Return
on average assets and return on average equity increased to 2.80% and 26.11%, respectively, in 2010 from 1.98% and 18.01% in 2009. The shareholders’ equity to total asset ratio declined slightly to 10.49% at the end of 2010 from 11.03% in 2009. The level of capital of AYCAL is lower than other hire purchase operators in the high-risk and high-return market segments. However, TRIS Rating expects the level of capital to rise gradually from internal growth of operating income in the future. -- End