RPT-Fitch Affirms ICBC (Thai) Leasing at 'AAA(tha)'/Stable
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Sept 3 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings (Thailand) Limited has affirmed ICBC (Thai) Leasing Company Limited's (ICBCTL) National Long- and Short-Term Ratings at 'AAA(tha)' and 'F1+(tha)' respectively. The Outlook is Stable.
The agency has also assigned ICBCTL's upcoming senior unsecured bonds of up to THB3bn, to be issued in two tranches with maturities of up to five years, National Long-Term ratings of 'AAA(tha)'. ICBCTL has an option to issue a further amount of up to THB2bn. The proceeds will be used to fund the expansion of the company's auto loan portfolio and to refinance maturing debt. A full list of rating actions is at the end of this commentary.
The senior notes are rated at the same level as ICBCTL's National Long-Term rating of 'AAA(tha)' as they represent unsecured and unsubordinated obligations of the company.
Key Rating Drivers - National Ratings and Senior Debt
The ratings are at the same level with those of its direct single parent, Industrial and Commercial Bank of China (Thai) Public Company Limited (ICBCT; AAA(tha)/Stable). This is based on a very high potential for extraordinary support, in case of need, from its parent. ICBCTL is a core subsidiary of ICBCT and a major contributor to the bank's retail business, accounting for 42% of the bank's total loan portfolio. ICBCTL also benefits from tight management, and strong capital and funding support from and operational integration with ICBCT.
ICBCTL's ratings also reflect a high probability of extraordinary support from and its strategic importance to the ultimate parent bank, Industrial and Commercial Bank of China (ICBC; A/Stable). ICBCTL has recently expanded into large-vehicle leasing with support from the ICBC group. Over the longer term, ICBC also intends to position ICBCTL as a regional hub for its leasing business in Southeast Asia.
The Stable Outlook is consistent with that of the parent.
ICBCTL's performance has been volatile due to 2012 tax incentives for first-time car buyers. Loan growth was exceptionally high at 39% in 2012 due to booming car sales, but is expected to moderate in 2013. One effect of the tax incentives has also been a drop in used-car prices. This is hurting ICBCTL's H113 profitability, through a wider loss on foreclosed assets (repossessed cars). Net profit in H113 was lower by 30% yoy at THB87m.
The company's asset quality has slightly deteriorated, with non-performing loans (NPLs) rising to 1.5% of total loans (THB803.8m) at end-H113 from 1.3% (THB590.1m) in end-2012 but remained lower than the industry average of 1.7%.
The increase was mainly due to NPLs from used-car loans, which account for about 51% of ICBCTL's loan portfolio. The company's reserve coverage was slightly down at 63% at end-H113 (end-2012: 67%).
ICBCTL (formerly Leasing Sinn Asia Company Limited) is a wholly owned subsidiary of ICBCT (formerly ACL Bank) and has been its flagship company for the auto hire purchase and leasing business in Thailand since 2005. The company has expanded its loan portfolio significantly since 2010, when ICBC became the largest shareholder of ICBCT. At end-2012, it was the ninth-largest player in Thailand's hire purchase and financial lease industry, with a market share of around 3%.
Rating Sensitivities - National Ratings and Senior Debt
A significant reduction in ICBCT's ability and/ or propensity to support ICBCTL, through a reduction in its stake or the latter's strategic importance to its ultimate parent, could affect the ratings. A material decline in ICBCTL's importance to ICBCT's core operation could lead to ICBCTL's ratings being notched down from that of ICBCT.
Key Rating Drivers - Short-term debenture programme
ICBCTL's programme is rated in line with the company's National Short-Term 'F1+(tha)' rating.
Rating Sensitivities - Short-term debenture programme
A downgrade of ICBCTL's short-term debenture programme would result from the downgrade of ICBCTL's National Long-Term 'AAA(tha)' rating by several notches. This is unlikely to happen in the near future given its Stable Outlook.
The list of affirmed ratings is as follows:
- National Long-Term Rating at 'AAA(tha)'; Stable Outlook
- National Short-Term Rating at 'F1+(tha)'
- National Long-Term guaranteed bonds by ICBCT at 'AAA(tha)' ; Stable Outlook
- National Long-Term senior unsecured bonds at 'AAA(tha)'
- National Short-Term unsecured unsubordinated debenture programme at 'F1+(tha)'
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