BANGKOK--NOV 9--TRIS
THAI RATING AND INFORMATION SERVICES (TRIS) ANNOUNCED A
CREDIT UPDATE, SATURDAY 9 NOVEMBER 1996,FOR CATHAY TRUST CO.,LTD.'S ISSUES
RATINGS. TRIS DOWNGRADED THE COMPANY'S 1,000 MILLION BAHT SENIOR DEBENTURES
DUE 2000 TO 'BBB-'. FROM 'BBB' AND THE 700 MILLION BAHT SUBORDINATED
DEBENTURES DUE 2001 TO 'BB+'FROM 'BBB-'. TRIS ALSO ASSIGNED A 'BBB-'
RATING TO CATHAY TRUST'S NEW 1,000 MILLION BAHT SENIOR DEBENTURES DUE
2001. THE RATINGS OF CATHAY TRUST'S EXISTING SENIOR AND SUBORDINATED DEBTS
ARE LOWERED FOLLOWING ITS CONTINUED WEAK PROFITABILITY AND MEDIOCRE ASSET
QUALITY. TRIS IS CONCERNED ABOUT THE COMPANY'S ABILITY TO WITHSTAND THE
INCREASINGLY COMPETITIVE AND CHANGING OPERATING ENVIRONMENT OF THAILAND'S
FINANCIAL SECTOR. ALTHOUGH THE COMPANY HAS STARTED TO IMPLEMENT A
REVAMPING PLAN, TRIS EXPECTS THAT THE COMPANY WILL NEED CONSIDERABLE TIME
AND EFFORT TO REGAIN ITS FORMER POSITION. NONETHELESS, ITS ADEQUATE
LIQUIDITY MANAGEMENT AND LONG-ESTABLISHED BUSINESS STANDING UNDER STRONG
REGULATORY CONTROL OVER THE FINANCE SECTOR SHOULD SOMEWHAT SUPPORT ITS
BOTTOM LINE RISK.
SINCE TRIS'S LAST REVIEW, CATHAY TRUST'S OPERATING PROFITABILITY
HAS DECREASED MORE THAN EXPECTED, ESPECIALLY IN THE SECOND HALF OF LAST
YEAR. THE COMPANY'S ROA WAS ONLY 0.3% FOR 1995. THIS IS ATTRIBUTED TO
CONTRACTION IN INTEREST SPREAD AND LOSS IN SECURITIES BUSINESS, AGGRAVATED
BY PROVISIONING AGAINST POSSIBLE LOAN LOSSES TO COMPLY WITH TIGHTER BANK
OF THAILAND REQUIREMENTS. IN RECOGNITION OF ITS POOR 1995 PERFORMANCE, THE
COMPANY EMBARKED ON RESTORING SECURITIES BUSINESS. THIS SHOULD HELP
ENHANCE ITS MARKET COMPETITIVENESS AND FUTURE EARNING CAPACITY. PROFITS
ARE EXPECTED TO IMPROVE ONLY SLOWLY AS ITS PORTFOLIO CONTAINS MODERATE
AMOUNTS OF NON-PERFORMING LOANS AND MORE PARTICIPANTS PURSUE FEWER LOAN
OPPORTUNITIES IN THE MIDDLE MARKET. ITS ASSET GROWTH HAS BEEN SLOWER THAN
THE PROJECTED RATE AND PAST EXPANSION BECAUSE OF AN UNFAVORABLE MARKET
ENVIRONMENT. FOR THE FIRST HALF OF 1996,THE COMPANY ACHIEVED ONLY 3% ASSET
GROWTH OVER THE YEAR-END 1995. ITS LOAN BOOK REMAINS GENERALLY UNCHANGED
AND ADEQUATELY DIVERSIFIED. REAL ESTATE EXPOSURE HAS BEEN MAINTAINED WELL
BELOW INDUSTRY AVERAGE, WHILE MARGIN LOANS HAVE BEEN REDUCED FOLLOWING THE
COMPANY'S POLICY TO FOCUS MORE ON INSTITUTIONAL BROKERAGE CLIENTS. CATHAY
TRUST'S ASSET QUALITY SLIGHTLY DETERIORATED AS A RESULT OF THE SLUGGISH
LOCAL ECONOMY. NON-ACCRUAL LOANS, TOTALING 1,301 MILLION BAHT OR 5.57% OF
AVERAGE LOANS, ARE CONSIDERED HIGH. PROBLEM LOANS, MOSTLY REAL-ESTATE-
RELATED, ARE ADEQUATELY COLLATERALIZED AND PROVIDED. LOAN LOSSES RESERVES
OF 265 MILLION BAHT STAND TIGHT AGAINST TOTAL CLASSIFIED ASSETS. CATHAY
TRUST'S ATTEMPT TO BOLSTER PROVISIONING WILL BE SLOW TO REALIZE BECAUSE OF
ITS LOW PROFITABILITY AND LIMITED CAPITAL ACCESS. RIGOROUS LOAN RECOVERY
AND MORE STRINGENT CREDIT APPROVAL PROCESS SHOULD HELP IMPROVE THE
COMPANY'S ASSET QUALITY OVER TIME.
OVERALL LIQUIDITY IS MANAGED ADEQUATELY. THE COMPANY HAS USED
PUBLIC BORROWINGS AS ITS MAJOR FUNDING SOURCES WHILE EMPLOYING MORE
DEBENTURES TO SUPPORT ITS LONG-TERM FUNDS. AS OF JUNE 1996, CATHAY TRUST'S
CAPITAL MEASURES STOOD AT THE LOWER END OF THE INDUSTRY. RECENT CAPITAL
INJECTION ELEVATED THE COMPANY'S EQUITY TO ASSETS RATIO TO ABOUT 7%. ITS
CAPITALIZATION REMAINS FRAGILE BECAUSE OF DEPRESSED NET INCOME AND ITS
INABILITY TO TAP THE DOMESTIC EQUITY MARKET. END.
NOTE: CATHAY TRUST CO.,LTD.: RATING ASSIGNED
CAT#2: 1,000 MB SR DEBS DUE 2000 DOWNGRADED TO BBB-FROM BBB
1,000 MB SR DEBS DUE 2001 BBB-
CAT#1: 700 MB SUB DEBS DUE 2001 DOWNGRADED TO BB+FROM BBB-
THAI RATING AND INFORMATION SERVICES (TRIS) ANNOUNCED A
CREDIT UPDATE, SATURDAY 9 NOVEMBER 1996,FOR CATHAY TRUST CO.,LTD.'S ISSUES
RATINGS. TRIS DOWNGRADED THE COMPANY'S 1,000 MILLION BAHT SENIOR DEBENTURES
DUE 2000 TO 'BBB-'. FROM 'BBB' AND THE 700 MILLION BAHT SUBORDINATED
DEBENTURES DUE 2001 TO 'BB+'FROM 'BBB-'. TRIS ALSO ASSIGNED A 'BBB-'
RATING TO CATHAY TRUST'S NEW 1,000 MILLION BAHT SENIOR DEBENTURES DUE
2001. THE RATINGS OF CATHAY TRUST'S EXISTING SENIOR AND SUBORDINATED DEBTS
ARE LOWERED FOLLOWING ITS CONTINUED WEAK PROFITABILITY AND MEDIOCRE ASSET
QUALITY. TRIS IS CONCERNED ABOUT THE COMPANY'S ABILITY TO WITHSTAND THE
INCREASINGLY COMPETITIVE AND CHANGING OPERATING ENVIRONMENT OF THAILAND'S
FINANCIAL SECTOR. ALTHOUGH THE COMPANY HAS STARTED TO IMPLEMENT A
REVAMPING PLAN, TRIS EXPECTS THAT THE COMPANY WILL NEED CONSIDERABLE TIME
AND EFFORT TO REGAIN ITS FORMER POSITION. NONETHELESS, ITS ADEQUATE
LIQUIDITY MANAGEMENT AND LONG-ESTABLISHED BUSINESS STANDING UNDER STRONG
REGULATORY CONTROL OVER THE FINANCE SECTOR SHOULD SOMEWHAT SUPPORT ITS
BOTTOM LINE RISK.
SINCE TRIS'S LAST REVIEW, CATHAY TRUST'S OPERATING PROFITABILITY
HAS DECREASED MORE THAN EXPECTED, ESPECIALLY IN THE SECOND HALF OF LAST
YEAR. THE COMPANY'S ROA WAS ONLY 0.3% FOR 1995. THIS IS ATTRIBUTED TO
CONTRACTION IN INTEREST SPREAD AND LOSS IN SECURITIES BUSINESS, AGGRAVATED
BY PROVISIONING AGAINST POSSIBLE LOAN LOSSES TO COMPLY WITH TIGHTER BANK
OF THAILAND REQUIREMENTS. IN RECOGNITION OF ITS POOR 1995 PERFORMANCE, THE
COMPANY EMBARKED ON RESTORING SECURITIES BUSINESS. THIS SHOULD HELP
ENHANCE ITS MARKET COMPETITIVENESS AND FUTURE EARNING CAPACITY. PROFITS
ARE EXPECTED TO IMPROVE ONLY SLOWLY AS ITS PORTFOLIO CONTAINS MODERATE
AMOUNTS OF NON-PERFORMING LOANS AND MORE PARTICIPANTS PURSUE FEWER LOAN
OPPORTUNITIES IN THE MIDDLE MARKET. ITS ASSET GROWTH HAS BEEN SLOWER THAN
THE PROJECTED RATE AND PAST EXPANSION BECAUSE OF AN UNFAVORABLE MARKET
ENVIRONMENT. FOR THE FIRST HALF OF 1996,THE COMPANY ACHIEVED ONLY 3% ASSET
GROWTH OVER THE YEAR-END 1995. ITS LOAN BOOK REMAINS GENERALLY UNCHANGED
AND ADEQUATELY DIVERSIFIED. REAL ESTATE EXPOSURE HAS BEEN MAINTAINED WELL
BELOW INDUSTRY AVERAGE, WHILE MARGIN LOANS HAVE BEEN REDUCED FOLLOWING THE
COMPANY'S POLICY TO FOCUS MORE ON INSTITUTIONAL BROKERAGE CLIENTS. CATHAY
TRUST'S ASSET QUALITY SLIGHTLY DETERIORATED AS A RESULT OF THE SLUGGISH
LOCAL ECONOMY. NON-ACCRUAL LOANS, TOTALING 1,301 MILLION BAHT OR 5.57% OF
AVERAGE LOANS, ARE CONSIDERED HIGH. PROBLEM LOANS, MOSTLY REAL-ESTATE-
RELATED, ARE ADEQUATELY COLLATERALIZED AND PROVIDED. LOAN LOSSES RESERVES
OF 265 MILLION BAHT STAND TIGHT AGAINST TOTAL CLASSIFIED ASSETS. CATHAY
TRUST'S ATTEMPT TO BOLSTER PROVISIONING WILL BE SLOW TO REALIZE BECAUSE OF
ITS LOW PROFITABILITY AND LIMITED CAPITAL ACCESS. RIGOROUS LOAN RECOVERY
AND MORE STRINGENT CREDIT APPROVAL PROCESS SHOULD HELP IMPROVE THE
COMPANY'S ASSET QUALITY OVER TIME.
OVERALL LIQUIDITY IS MANAGED ADEQUATELY. THE COMPANY HAS USED
PUBLIC BORROWINGS AS ITS MAJOR FUNDING SOURCES WHILE EMPLOYING MORE
DEBENTURES TO SUPPORT ITS LONG-TERM FUNDS. AS OF JUNE 1996, CATHAY TRUST'S
CAPITAL MEASURES STOOD AT THE LOWER END OF THE INDUSTRY. RECENT CAPITAL
INJECTION ELEVATED THE COMPANY'S EQUITY TO ASSETS RATIO TO ABOUT 7%. ITS
CAPITALIZATION REMAINS FRAGILE BECAUSE OF DEPRESSED NET INCOME AND ITS
INABILITY TO TAP THE DOMESTIC EQUITY MARKET. END.
NOTE: CATHAY TRUST CO.,LTD.: RATING ASSIGNED
CAT#2: 1,000 MB SR DEBS DUE 2000 DOWNGRADED TO BBB-FROM BBB
1,000 MB SR DEBS DUE 2001 BBB-
CAT#1: 700 MB SUB DEBS DUE 2001 DOWNGRADED TO BB+FROM BBB-