Fitch Rates Kasikornbank's Basel III Tier 2 THB Notes at 'AA-(tha)'

Thu Aug 28, 2014 1:37am EDT

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(The following statement was released by the rating agency) BANGKOK/SINGAPORE, August 28 (Fitch) Fitch Ratings-Bangkok- 28 August 2014: Fitch Ratings (Thailand) has rated Kasikornbank Public Company Limited's (KBank; AA(tha)/Stable) proposed Thai baht-denominated subordinated unsecured notes at 'AA-(tha)'. This will be KBank's first issue of a Basel III-compliant Tier 2 instrument. The bank will use the proceeds to strengthen its Tier 2 capital and for general corporate purposes. KEY RATING DRIVERS The Basel III Tier 2 notes are rated one notch below the anchor rating to reflect their higher loss-severity risk relative to senior unsecured instruments arising from their subordinated status. Key terms of the notes include a non-viability trigger (defined as emergency capital assistance from the central bank or any other empowered government agency), with a partial rather than mandatory full write-down feature. The Tier 2 notes are senior to any Additional Tier 1 securities with loss-absorption features. In the event of a write-down, the Tier 2 notes would be written down on a pari passu basis with all other Tier 2 loss-absorbing instruments with write-down features of the issuer. KBank's National Long-Term Rating of 'AA(tha)' is used as the anchor rating because the rating is based on the bank's stand-alone financial strength. Fitch believes that the bank's stand-alone credit profile is the best indicator for non-performance risk (i.e. becoming non-viable). No additional notching has been applied as the notes do not have any going-concern loss-absorption features. KBank's stand-alone financial strength reflects its solid domestic franchise, improved asset quality, steady funding, sound capitalisation, as well as its high profitability. RATING SENSITIVITIES Any change in KBank's stand-alone credit profile and in its National Long-Term Rating would similarly affect the rating of these notes. A significantly weaker-than-expected operating environment and local economy could result in a negative rating action on KBank's Issuer Default Ratings, Viability Rating, and National Rating. Deterioration in asset quality that leads to a material erosion of profitability or capital could negatively affect KBank's ratings. There is limited rating upside over the next one to two years. The other ratings of KBank are unaffected and are as follows: Long-Term Foreign Currency IDR: 'BBB+'; Outlook Stable Short-Term Foreign Currency IDR: 'F2' Viability Rating: 'bbb+' Support Rating: '2' Support Rating Floor: 'BBB-' National Long-Term Rating: 'AA(tha)'; Outlook Stable National Short-Term Rating: 'F1+(tha)' Senior unsecured USD2.5bn euro medium-term note programme: 'BBB+' Long-term foreign currency senior unsecured debt: 'BBB+' National short-term senior unsecured debt rating: 'F1+(tha)' National long-term subordinated debt (legacy Basel II Tier 2 securities) rating: 'AA-(tha)' Contacts: Primary Analyst Patchara Sarayudh Director +662 108 0152 Fitch Ratings (Thailand) Limited Park Ventures, Level 17 57 Wireless Road, Lumpini Patumwan, Bangkok 10330 Secondary Analyst Trin Siriwutiset Associate Director +662 108 0154 Committee Chairperson Jonathan Cornish Managing Director +852 2263 9901 Disclosure: Kasikorn Asset Management Company Limited (of which KBank holds a 100% stake) owns 10% of the shares in Fitch Ratings (Thailand) Limited. Muang Thai Life Assurance Company Limited (of which KBank holds a 38.3% economic interest) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operations of, or credit rating reviews undertaken by Fitch Ratings (Thailand) Limited. Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, "Global Financial Institutions Rating Criteria", dated 31 January 2014, "Assessing and Rating Bank Subordinated and Hybrid Securities Criteria" dated 31 January 2014, and "National Scale Rating Criteria", dated 30 October 2013, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here National Scale Ratings Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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