TRIS Rating Upgrades Ratings of “BAY”, Company and Senior Debts — to “AA-” From A+”, Subordinated Debts — to “A+” from “A”

TRIS Rating Co., Ltd. has upgraded the company rating of Bank of Ayudhya PLC (BAY) to “AA-” from “A+”, and has also upgraded the ratings of BAY’s senior debentures and subordinated debentures to “AA-” and “A+” from “A+” and “A”, respectively, with “stable” outlook. The ratings reflect BAY's improved financial performance, improved asset quality, and growing franchise value. The ratings are also enhanced by the continuous support from the GE Group after GE Capital International Holdings Corporation (GECIH) became the largest shareholder, owning a 33% stake in BAY. The drive to realize synergies is reflected in the bank's acquisition of Ayudhya Capital Auto Lease PLC (AYCAL), Thailand’s second largest auto hire purchase loan provider, in February 2008. The acquisition helped improve the bank’s financial performance. However, the ratings are constrained by the bank’s high level of legacy non-performing loans (NPL), a difficult operating environment, and intensifying competition, all of which might limit business growth and profitability.

The “stable” outlook reflects the expectation that BAY will be able to sustain its financial performance and improve asset quality in the medium term. In addition, the bank is expected to continue to gain benefits from synergies with GE in terms of growing profitable loan portfolio and rising market share in retial banking. Prudent risk management system and practices to control asset quality are also essential for the bank during its expansion period.

TRIS Rating reported that BAY is the fifth largest commercial bank in Thailand in terms of assets, with a 9.4% market share in loans and an 8.7% share in deposits as of December 2008. The strategy to leverage GE’s expertise in retial banking helped BAY achieve both organic growth and growth through acquisitions. BAY paid Bt16.2 billion for the AYCAL loan portfolio worth Bt75.3 billion in February 2008. The acquired portfolio accounted for 17% of the bank’s total loan portfolio on the acquisition date. As of December 2008, BAY’s total loans grew by 27%, of which the hire purchase portfolio from AYCAL accounted for 20% of total loan growth. Following the successful acquisition of AYCAL in February 2008, BAY completed the other acquisition deal of two businesses from American International Group, Inc. (AIG) in April 2009. BAY bought 99.5% of AIG Retail Bank PLC (AIGRB) and 100% of AIG Card (Thailand) Co., Ltd. (AIGCC), for a combined acquisition price of Bt1.6 billion. The portfolio size of AIGCC and AIGRB accounts for 4% of BAY’s total loans. The purchases will enlarge BAY’s retail customer base and BAY’s retail lending portfolio by 12% from Bt181.8 billion as of December 2008 to Bt203.3 billion.

In terms of asset quality, in 2008, the bank partially resolved its high legacy NPLs by selling Bt15.0 billion of NPLs out of a total of Bt70.6 billion as of December 2007. BAY’s ratio of NPL to total loans improved from 15.4% in 2007 to 9.4% in 2008. However, the ratio is still far above the industry average of 6.9% for 12 Thai universal banks. BAY’s non-performing assets (classified loans of more than three months past due, the outstanding amount of troubled debt restructuring and foreclosed property) were 1.1 times capital funds and the allowance for loan losses in 2008. This ratio improved from 1.3 times in 2007. The improvement was largely due to the result of the capital injection from GECIH in 2007 and the sales of NPLs during 2007 and 2008. In the future, economic conditions and political stability will determine the success of BAY’s efforts to improve asset quality and grow a profitable loan portfolio.

Profitability in 2008 improved significantly. BAY turned a profit of Bt4.9 billion in 2008 compared with a loss of Bt3.9 billion in 2007, partly from the consolidation of revenue from AYCAL. In 2008, BAY’s capital adequacy ratio (BIS ratio) decreased following the AYCAL acquisition and the changes needed to comply with Basel II regulations, as required by the Bank of Thailand. The BIS ratio fell from 20.4% in 2007 to 17.8% in 2008 under Basel I criteria. Under the Basel II framework, the reported BIS ratio was 14.9% in 2008, in line with an industry average of 14.8% for the 12 Thai universal banks.-- End

Company Rating: Upgraded to AA- from A+ Issue Ratings: BAY106A: Bt16,844 million senior debentures due 2010 Upgraded to AA- from A+ BAY116A: Bt5,049 million senior debentures due 2011 Upgraded to AA- from A+ BAY13NA: Bt12,000 million subordinated debentures due 2013 Upgraded to A+ from A Rating Outlook: Stable Copyright 2009, 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. 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.

---