TRIS Rating assigns the company rating on Government Housing Bank (GHB) at ?AAA? with a ?stable? outlook and, at the same time, assigns the issue ratings on Secondary Mortgage Corporation (SMC)?s senior unsecured debentures at ?AAA?.
The ratings reflect GHB?s legal status as a state-owned enterprise (SOE) and a specialized financial institution (SFI) which has an ?integral? linkage with the Thai government and a ?critical? public policy role to promote home ownership for the lower- and middle-income groups. The ratings also take into account the likelihood of the government providing explicit guarantees on GHB?s obligations in line with other SFIs, if needed. In our opinion, there is an almost certain likelihood that GHB will receive timely and sufficient extraordinary support from the government in the event of financial distress, subject to the Cabinet approval.
The ?stable? outlook is based on our expectation that GHB?s integral linkage with the government and its critical public policy role will remain unchanged in the foreseeable future.
The assignment of the issue ratings on SMC?s debentures reflects the merging of SMC into GHB, pursuant to the Act for the Dissolution of the Secondary Mortgage Corporation B.E. 2563 (2020) announced in the Royal Gazette on 23 September 2020, by which all of SMC?s assets and liabilities have been transferred to GHB.
KEY RATING CONSIDERATIONS
Integral linkage with the government
GHB is an SFI established under the Government Housing Bank Act B.E. 2496 (1953). We assess GHB?s linkage with the government as ?integral?, the highest level of government linkage, due to its status as an SOE given the government's full ownership through the Ministry of Finance (MOF). The linkage is also underpinned by the past track record of financial support from the government in the forms of capital injections and debt guarantee. The government also has a tight control over GHB through the appointment of the bank?s senior management and board of directors. As an SOE, GHB is evaluated by the State Enterprise Policy Office (SEPO) under the MOF for its operational management and performance. As an SFI, GHB is supervised by the Bank of Thailand (BOT) on aspects involving risk management, capital adequacy, and consumer protection.
Critical policy role
We assess GHB?s public policy role as ?critical?, which is the highest level, given its distinct policy role to promote home ownership for the low- and middle-income groups by providing affordable home loans. The government provides ongoing support to GHB enabling it to carry out its mandate under the ?Public Service Account? (PSA) via subsidies for interest costs and losses arising from the implementation of the government's policies.
Thailand?s largest residential mortgage lender
GHB stands out as the largest residential mortgage provider with a market share of 31.15% at the end of December 2019. Among the SFIs, GHB is the third largest in terms of total asset size. At the end of December 2019, the bank?s total assets amounted to THB1.2 trillion, with a market share of 6.5% in loans and 5.1% in deposits among the Thai commercial banks and the SFIs. GHB?s well-established market position is underpinned by its important and unique mandate to serve low- and medium-income borrowers at affordable costs. More than 90% of GHB?s customers are in the low- and medium-income groups. Government employees represent about 60% of its customer base. At the end of June 2020, GHB?s capital adequacy ratio stood at 15.26%, well-above the regulatory requirement.
RATING OUTLOOK
The ?stable? outlook reflects our expectation that GHB will maintain its ?integral? linkage with the government, its legal status as an SFI and a state-owned enterprise, and its ?critical? public policy role.
RATING SENSITIVITIES
The ratings or outlook could be revised downward if there is any significant change in government policy that affects GHB's policy role or linkage with the government.
COMPANY OVERVIEW
GHB is an SFI founded on 9 January 1953 under the Government Housing Bank Act B.E.2496 announced in the Royal Thai Government Gazette on 20 January 1953. GHB is wholly owned by the government through the MOF with an initial capital of THB20 million. The main policy role of GHB is to promote home ownership by providing accessible and affordable housing finance, particularly for low- and medium-income borrowers.
In the beginning phase, GHB not only acted as a residential mortgage lender but also developed housing projects and sold houses via hire purchase contracts. However, all GHB?s assets, liabilities, and rights associated with the housing business under the Government Housing Bank Act B.E. 2496 (1953) Section 27(1) and Section 27(3) were transferred to the National Housing Authority (NHA) in 1973 in accordance with announcement No. 316 of the Revolution Group.
During severe economic slowdown in 1997-1999, GHB, in cooperation with the Government Savings Bank (GSB), played an important role in reviving the housing and real-estate sectors by offering 30-year fixed low-interest loans and debt restructuring.
Previously, GHB operated under the supervision of the MOF. On 2 April 2015, the MOF appointed the BOT to supervise and examine all SFIs, including GHB.
In 2016, GHB announced its new mission of ?Enabling more Thai people to have their own homes? and a new vision of ?The Best Housing Solution Bank?. During the past few years, GHB has applied new digital technology and implemented projects to increase its internal management efficiency and transform itself into a modern and sustainable housing bank.
Following the announcement of the Act for the Dissolution of the Secondary Mortgage Corporation B.E. 2563 (2020) in the Royal Gazette on 23 September 2020, SMC?s assets and liabilities were transferred to GHB on 24 September 2020 after the dissolution of SMC. Since then, GHB has assumed the roles and responsibilities of SMC. The key rationale for the merger was to enhance efficiency.
RELATED CRITERIA
- Government-Related Entities Rating Methodology, 30 July 2020
Government Housing Bank (GHB)
Company Rating: AAA
Issue Ratings:
SMCT20NA: Bt1,000 million senior unsecured debentures due 2020 AAA
SMCT216A: Bt1,250 million senior unsecured debentures due 2021 AAA
SMCT21OA: Bt700 million senior unsecured debentures due 2021 AAA
SMCT236A: Bt750 million senior unsecured debentures due 2023 AAA
SMCT238A: Bt700 million senior unsecured debentures due 2023 AAA
SMCT23OA: Bt500 million senior unsecured debentures due 2023 AAA
Rating Outlook: Stable