RPT-Fitch Rates CIMB Securities (Thailand) at 'AA-(tha)'; Outlook Stable

Fri Mar 7, 2014 3:08am EST

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March 7 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings (Thailand) has assigned CIMB Securities (Thailand) Company Limited (CIMBS) a National Long-Term Rating of 'AA-(tha)' and a National Short-Term Rating of 'F1+(tha)'. The Outlook is Stable.

KEY RATING DRIVERS

CIMBS's ratings are based on institutional support from Malaysia-based CIMB Group. Fitch views CIMBS as a strategically important subsidiary of the CIMB Group, which is evidenced by full ownership, its integral role in the group's universal banking and south-east Asian strategy, name sharing, and strong operational integration.

CIMBS is a direct wholly owned subsidiary of CIMB Securities International Pte Ltd (CSI), which is a holding company of the group. The group has effective control over CIMBS through the appointment of its board of directors and key management.

CIMBS is positioned as the group's equity brokerage arm in Thailand. The CIMB Group provided capital injections to CIMBS in 2011 and 2012 and has extended to the company loans and guarantees. CIMBS is also highly integrated with the group, reporting to the group for key operations, sharing resources, adhering to standardised operating processes, and co-operating in business and client referrals.

The Stable Outlook reflects Fitch's expectation that the group's ability and propensity to provide extraordinary support, if needed, will be maintained over the medium-term.

CIMBS's performance will remain volatile as its core business is highly reliant on stock market conditions. The intensifying competition in Thailand and high operating costs will continue to constrain CIMBS's performance over the next few years. Nevertheless, Fitch believes CIMBS's improved market position, larger client base, and the group's well-established regional franchise will help offset some of the downside risks.

CIMBS's performance has been improving since 2012, driven by the company's increase in market share following acquisitions and favourable stock market conditions. The company's performance in 1H13 was solid with net profit of THB199.2m and return on equity of 20.3% (2012: THB106.3m and 7.5%), supported by favourable stock market conditions and a larger client base. CIMBS became a member of the CIMB Group in 2009 after the group acquired its former parent, BankThai Public Company Limited. Since then, CIMBS has acquired two local securities firms, CIMB-GK Securities (Thailand) Limited and SICCO Securities Public Company Limited. CIMBS had a 4.5% share of the market by trading volume in 2013, making it the eighth-largest among 33 securities firms in Thailand.

RATING SENSITIVITIES

Any changes in the CIMB Group's ability and/or propensity to support CIMBS could affect the latter's National ratings.

An upgrade of Thailand's Long-Term Local-Currency Issuer Default Rating (IDR) of 'A-' could affect the relative positions within the National rating scale and may result in a downgrade of CIMBS's National ratings. A downgrade of Thailand's Long-Term Local-Currency IDR may result in an upgrade. However, Fitch believes this is unlikely to occur in the near term as Thailand's ratings are currently on Stable Outlook.

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