Bangkok--Aug 26--TRIS
Thai Rating and Information Services (TRIS) announced Tuesday, 26
August 1997, in a CreditUpdate that it has downgraded the company rating
of Industrial Finance Corporation of Thailand (IFCT) from AA+ to AA- and
the company rating of Thai Farmers Bank PLC (TFB) from AA+ to AA-. TRIS
also downgraded the rating of TFB's 7,500 million baht subordinated
debentures due 2001 from AA to A+. At the same date, TRIS cancelled the
rating of Siam City Bank PLC (SCIB) at the request of the company.
TRIS reported that IFCT downgrade is based on its weakened asset
quality and the continued effects of the tough operating environment on
its medium-term business and financial standings. While TFB's downgraded
ratings reflect more deterioration in its asset quality than expected and
the increasing sensitivity of its financial profile to lower earnings,
weakened capital and the tight local financial market.
TRIS reported the rating condition of the Thai financial industry
that the authorities have recently initiated a series of measures to
resolve structural problems in Thailand's economy and financial system.
One of the measures is to restore severely eroded confidence in the Thai
financial institution system which has caused continued liquidity strains in
the system. Fifty eight finance and securities companies were ordered to
suspend operations and submit their rehabilitation plans for approval to
resume operations. The result, whether it be mergers among these companies,
changing the ownership structures or permanent closures, should expedite the
rationalization process which entails a structural change in the financial
system. Institution of deposit insurance and refinement of the regulatory
framework are also included in the reforms of the financial institutions.
However, Thai financial institutions are expected to remain under severe
pressure of impending problems and recovery uncertainty for the short and
medium terms. Foreign interests in the local financial sector are becoming
more prominent which will intensify even more the competitive environment for
local players. The managed-float exchange rate regime led to baht
devaluation and the instability of the exchange rate remains a sensitivity.
Corporate foreign-currency borrowers will be directly affected. Financial
institutions' exchange risks are manageable, given the regulatory net open
position guidelines. Nevertheless, concerns remain about the credit risks of
financial institutions's borrowers. This is likely to further weaken asset
quality of financial institutions, particularly those with high exposures to
foreign-currency loans. Additionally, the likelihood of continued high
interest rates, rising inflation and tight liquidity conditions during the
transition period is expected to keep the system's operating environment
under stress.
On 2 and 3 July 1997, TRIS placed the financial institutions it
has rated on CreditAlert with "developing" implication for the structural
developments in the financial institution sector and with "negative"
implication on the change of Thailand's exchange rate system to a managed
float. TRIS's current assessment affirms the hightened risk of the
financial industry over the medium term. Austere market prospects and
regulatory trends toward limited supports are expected to impact financial
institutions to differing degrees.
Note: Industrial Finance Corporation TRIS's rating
of Thailand (IFCT)
Sr debt: Downgraded to AA- from AA+
Thai Farmers Bank PLC (TFB)
Sr debt: Downgraded to AA- from AA+
TFB#1:7,500 mb sub debs due 2001 Downgraded to A+ from AA
Siam City Bank PLC (SCIB)
Sr debt: Cancelled
SCIB#1:3,000 mb sub debs due 2001 Cancelled
SCIB#2,3:1,750 mb sub debs due 2002 Cancelled
End.
Thai Rating and Information Services (TRIS) announced Tuesday, 26
August 1997, in a CreditUpdate that it has downgraded the company rating
of Industrial Finance Corporation of Thailand (IFCT) from AA+ to AA- and
the company rating of Thai Farmers Bank PLC (TFB) from AA+ to AA-. TRIS
also downgraded the rating of TFB's 7,500 million baht subordinated
debentures due 2001 from AA to A+. At the same date, TRIS cancelled the
rating of Siam City Bank PLC (SCIB) at the request of the company.
TRIS reported that IFCT downgrade is based on its weakened asset
quality and the continued effects of the tough operating environment on
its medium-term business and financial standings. While TFB's downgraded
ratings reflect more deterioration in its asset quality than expected and
the increasing sensitivity of its financial profile to lower earnings,
weakened capital and the tight local financial market.
TRIS reported the rating condition of the Thai financial industry
that the authorities have recently initiated a series of measures to
resolve structural problems in Thailand's economy and financial system.
One of the measures is to restore severely eroded confidence in the Thai
financial institution system which has caused continued liquidity strains in
the system. Fifty eight finance and securities companies were ordered to
suspend operations and submit their rehabilitation plans for approval to
resume operations. The result, whether it be mergers among these companies,
changing the ownership structures or permanent closures, should expedite the
rationalization process which entails a structural change in the financial
system. Institution of deposit insurance and refinement of the regulatory
framework are also included in the reforms of the financial institutions.
However, Thai financial institutions are expected to remain under severe
pressure of impending problems and recovery uncertainty for the short and
medium terms. Foreign interests in the local financial sector are becoming
more prominent which will intensify even more the competitive environment for
local players. The managed-float exchange rate regime led to baht
devaluation and the instability of the exchange rate remains a sensitivity.
Corporate foreign-currency borrowers will be directly affected. Financial
institutions' exchange risks are manageable, given the regulatory net open
position guidelines. Nevertheless, concerns remain about the credit risks of
financial institutions's borrowers. This is likely to further weaken asset
quality of financial institutions, particularly those with high exposures to
foreign-currency loans. Additionally, the likelihood of continued high
interest rates, rising inflation and tight liquidity conditions during the
transition period is expected to keep the system's operating environment
under stress.
On 2 and 3 July 1997, TRIS placed the financial institutions it
has rated on CreditAlert with "developing" implication for the structural
developments in the financial institution sector and with "negative"
implication on the change of Thailand's exchange rate system to a managed
float. TRIS's current assessment affirms the hightened risk of the
financial industry over the medium term. Austere market prospects and
regulatory trends toward limited supports are expected to impact financial
institutions to differing degrees.
Note: Industrial Finance Corporation TRIS's rating
of Thailand (IFCT)
Sr debt: Downgraded to AA- from AA+
Thai Farmers Bank PLC (TFB)
Sr debt: Downgraded to AA- from AA+
TFB#1:7,500 mb sub debs due 2001 Downgraded to A+ from AA
Siam City Bank PLC (SCIB)
Sr debt: Cancelled
SCIB#1:3,000 mb sub debs due 2001 Cancelled
SCIB#2,3:1,750 mb sub debs due 2002 Cancelled
End.