TRIS Rating Affirms Company and Issue Ratings of “TCAP” at “A/Stable”

TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Thanachart Capital PLC (TCAP) at “A” with “stable” outlook. The ratings reflect TCAP’s position as an investment holding company of Thanachart Group, its management control of Thanachart Bank PLC (TBANK) through a 50.92% ownership stake, and a stable stream of dividends from TBANK. The ratings take into consideration the capable management team, improvement in the risk management system, a strong capital base, and a strong business and financial support from its strategic partner — Bank of Nova Scotia (BNS). In addition, the widen scope of its banking businesses with its growing numbers of branches will strengthen the group’s market position, business diversification and financial performance in the future. However, these strengths are constrained by an unfavourable economy, plus competition and uncertainty in the banking, hire purchase, and securities industries. These factors might limit the group’s profitability and expansion opportunities.

The “stable” outlook reflects the expectation that TBANK, as the major source of revenue for TCAP, will continue to generate stable earnings for the company. In addition, strong financial support and business know-how from both strategic partners -- BNS and TCAP -- will enhance TBANK’s overall business performance. The company’s financial performance is expected to improve in the future. Future growth, both organic and growth though acquisitions or joint venture between TCAP and BNS will be possible. The solid capital base and adequate liquidity is also crucial to help mitigate future downside risks during economic slump.

TRIS Rating reported that in 2008, TBANK contributed 92% of total revenue to TCAP on a consolidation basis. The remaining 8% was from TCAP’s core operation and its subsidiaries, including Max Asset Management Co., Ltd. (MAX) and NFS Asset Management Co., Ltd. (NFS-AMC). Based on consolidated asset size as of December 2008, TCAP is ranked eighth among all 12 Thai universal banks, with a 4.7% market share in loans and in deposits. TCAP has developed a proficient management team that has enabled the company to support the competitive position of its subsidiary and allowed TCAP to remain flexible in response to changes in the economic and business environments. The company’s consolidated risk management framework has improved continuously to comply with international standards. However, a sharp economic slowdown and high competitive environment in the banking industry are expected to limit growth and profitability of TBANK and TCAP’s two asset management companies over the next two years.

TRIS Rating said, TBANK, currently operates under a universal banking license. As part of a group’s reorganization plan, in 2007, TBANK bought eight subsidiaries from TCAP. In July 2007, TCAP signed a joint venture agreement with BNS for the investment in TBANK, changing TBANK’s shareholding structure. TCAP’s shareholding in TBANK was reduced from 99.36% to 74.92% as of 19 July 2007; the balance of 24.98% was held by BNS. On 3 February 2009, TCAP sold additional shares of TBANK to BNS in accordance with the shareholder agreements. The sale covered 416,526,737 shares at Bt18.38 per share (1.6 times book value per share), worth Bt7,656 million. TCAP booked gain from sale of investment for Bt2.8 billion. This transaction increased BNS’s shareholding in TBANK up to 48.99% while TCAP held 50.92% of TBANK. TBANK has a well-balanced revenue base from interest and non-interest income, in line with its universal banking platform. Interest income accounted for 66% of total revenue, mainly from TBANK’s market leading position in hire purchase business. The insurance businesses contributed the largest portion of non-interest income. These businesses posted significant growth in 2007 and 2008. -- End

Company Rating: Affirmed at A Issue Ratings: TCAP103A: Bt4,000 million senior debentures due 2010 Affirmed at A TCAP105A: Bt2,500 million senior debentures due 2010 Affirmed at A TCAP11NA: Bt1,500 million senior debentures due 2011 Affirmed at 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.

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