TRIS Rating Assigns “AAA/Stable” Rating to Senior Unsecured Debt Worth Up to Bt10,000 Million of “KCC”

TRIS Rating affirms the company rating of Krungsriayudhya Card Co., Ltd. (KCC) and the ratings of KCC’s existing senior unsecured debentures at “AAA”. At the same time, TRIS Rating assigns the ratings of KCC’s proposed issues of senior unsecured debentures of up to Bt10,000 million due within two years at “AAA”. The ratings reflect KCC’s status as a core subsidiary of Bank of Ayudhya PLC (BAY), a commercial bank with branches throughout Thailand rated “AAA” with a “stable” outlook by TRIS Rating.

The ratings also reflect KCC’s status as a fully-owned, solo-consolidated subsidiary of BAY. KCC is closely supervised and monitored by its parent bank, BAY, and, as such, is indirectly controlled by the Bank of Thailand (BOT). KCC has fully integrated its operations with BAY. BAY also supports KCC both in the forms of business cooperation and financial assist through credit facilities.

KCC has maintained its leading market position in the credit card business with an 11% market share of outstanding receivables over the past few years. KCC has strong underwriting and collection systems as evidenced in the ratio of non-performing loans (NPLs are loans of more than 90 days past due) to total loans (NPL ratio). KCC maintained its NPL ratio for credit cards at 1.1% at the end of 2016, lower than the industry average of 2.8%. The results are similar for personal loans. KCC reported an NPL ratio for personal loans at 2.1% at the end of 2016, lower than the industry average of 3.2%. The company has maintained a conservative provisioning policy by setting the ratio of the allowance for loan losses against total loans at 6.3% as of December 2016, making the NPL coverage ratio (the ratio of the allowance for doubtful accounts to NPLs) rose to 545% at the end of 2016. This percentage is expected to be enough for a cushion against any potential adverse change in the operating environment.

KCC’s financial performance has been moving in a positive direction. Net income jumped continuously to Bt1,427 million in 2016, from Bt1,213 million in 2015. The return on average assets (ROAA) was 3.2% in 2016, improving from 2.8% in 2015. KCC’s net income for 2016 accounted for 6.6% of BAY’s consolidated net income for the same period. The new regulation implemented on 1 September 2017 will affect KCC’s profitability, particularly the decreasing interest rate ceiling. However, TRIS Rating expects KCC will adapt and deliver an acceptable financial performance.

RATING OUTLOOK

The “stable” rating outlook reflects the expectation that KCC will maintain its status as a core subsidiary of the BAY Group and will continue to receive strong support from BAY.

RATING SENSITIVITIES

KCC’s credit profile could be affected if the BAY Group’s credit profile changes or TRIS Rating notices any significant change regarding the degree of support provided by BAY to KCC or the importance of KCC to the BAY Group.

TRIS Rating Co., Ltd./www.trisrating.com Contact: [email protected], Tel: 0-2098-3000/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand ? Copyright 2018, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution, or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited, without the prior written permission of TRIS Rating Co., Ltd. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.