(Repeat for additional subscribers)
June 24 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Thanachart Bank
Public Company Limited's (TBANK) Long-Term Issuer Default Rating (IDR) at 'BBB-'
and its majority shareholder Thanachart Capital Public Company Limited's (TCAP)
National Long-Term Rating at 'A(tha)'. The Outlook is Negative.
A full list of rating actions is included at the end of this commentary.
KEY RATING DRIVERS - TBANK
TBANK's IDRs, VR, and National Ratings take into account its domestic franchise
as the sixth largest commercial bank in Thailand, and its leading market
position in auto hire purchase. Fitch expects continued ordinary support from
its 49%-shareholder the Bank of Nova Scotia (BNS; AA-/Stable), particularly in
operations and risk management. The bank benefited from a one-off gain from the
sale of its subsidiary Thanachart Life Assurance in 2Q 2013. TBANK has shown
improvements in capitalisation, funding and reserve coverage over the past three
The bank's recent sound performance has reduced the risk of a downgrade. However
the ratings Outlook remains negative; this is driven by Thailand's challenging
operating environment and economic outlook, which may have further uncertain
impact on TBANK's performance. The operating environment contributed to an
uptick in TBANK's NPL ratio, which already is relatively high (4.6% in 1Q 2014)
compared with sector averages. However, the overall financial profile of the
bank remains comparable to 'bbb-' local and regional peers.
The Support Rating and Support Rating Floor of TBANK reflect Fitch's view that
there is a moderate probability of support from the government, in case of need.
This is due to the bank's systemic importance to the domestic financial sector,
as a medium-sized commercial bank with a market share for loans of around 7%.
RATING SENSITIVITIES - TBANK
An ability to sustain recent improvements in its credit profile, particularly in
the face of the uncertain operating environment, would lead to a revision of the
Outlook to Stable
Meanwhile, a material reversal of recent gains in key financial measures such as
leverage and liquidity, along with a decline in TBANK's performance relative to
its peers, could lead to a downgrade. Nevertheless, Fitch expects the bank's
buffers to be sufficient for weathering a normal economic downturn without any
negative ratings action.
An increase in the shareholding of BNS, and in its level of control of the bank,
could be a positive ratings driver.
KEY RATING DRIVERS - TCAP
TCAP's National Ratings are notched down from its core operating subsidiary
TBANK, to reflect its structural subordination, a reliance on dividend payments
from TBANK, and the presence of large minority interests. The Outlook matches
that of TBANK.
TCAP's Support Rating reflects Fitch's expectation that there can be no reliance
on sovereign support, due to the holding company structure and the likelihood
that any support would be applied at TBANK rather than TCAP.
RATING SENSITIVITIES - TCAP
Any change in TBANK's ratings could have a corresponding impact on TCAP.
A significant deterioration in TCAP's liquidity or leverage profile could result
in a wider notching from TBANK.
The list of rating actions is as follows:
Long-Term IDR affirmed at 'BBB-'; Outlook Negative
Short-Term IDR affirmed at 'F3'
Support Rating Floor affirmed at 'BB+'
National Long-Term Rating affirmed at 'A+(tha)'; Outlook Negative
National Short-Term Rating affirmed at 'F1+(tha)'
Support Rating affirmed at '3'
Viability Rating affirmed at 'bbb-'
National Long-Term Rating affirmed at 'A(tha)' ; Outlook Negative
National Short-Term Rating affirmed at 'F1(tha)'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'