Fitch has upgraded the National Long-Term Rating of Krungthai Zmico Securities Company Limited (KTZ) to 'AA-(tha)' from 'A+(tha)' and affirmed its National Short-Term Rating at 'F1+(tha)'. The Outlook is Stable. Fitch has also upgraded KTZ's senior unsecured debt rating to 'AA-(tha)' from 'A+(tha)'.
The rating action follows the upgrade of the National Long-Term Rating on KTZ's parent Krung Thai Bank Public Company Limited (KTB; AAA(tha)/Stable) on 1 December 2021.
KEY RATING DRIVERS
KTZ's National Long-Term Rating is driven by Fitch's expectation of institutional support from KTB. Fitch views that there have been no changes in KTB's propensity to support KTZ. KTZ is the only subsidiary in the group operating in the securities sector, and it has synergies with KTB in providing equity-related products to bank clients.
Nonetheless, KTZ's National Long-Term Rating is three notches below KTB's on the national rating scale. This is a wider differential than for other bank-owned securities subsidiaries rated by Fitch. This reflects KTB's partial ownership of KTZ at 50%, with a significant minority shareholder, which leads to lower potential levels of management integration and control compared to other bank-owned securities firms rated by Fitch. KTZ's branding also combines those of its two major shareholders.
KTZ's standalone credit profile does not directly drive its rating, but its financial performance has improved over the past two years, in line with more positive conditions in the securities sector.
KTZ's senior unsecured debt is rated on par with the issuer's National Long-Term Rating of 'AA-(tha)' as the company's senior debt constitutes its unsecured and unsubordinated debt obligations.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Fitch may upgrade KTZ's National Ratings if we believe that KTB's propensity to support its subsidiary has increased. This may happen, for example, if KTB increases its stake in the company to over 75%, with greater levels of control or strengthened operational linkages, or if KTZ starts to play a more significant role in its parent bank's overall business.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade in KTB's National Long-Term Rating would likely be reflected in KTZ's ratings.
Fitch may also downgrade KTZ's National Ratings if we perceive that KTB's propensity to support its subsidiary has diminished. This may happen if KTB reduces its stake to no longer be the largest shareholder or exercise control over the company, or if future performance of the subsidiary or its parent bank leads to changes in strategic priorities that raise questions over support prospects from the parent in the longer term. Nevertheless, Fitch views such outcomes as unlikely in the near term.
KTZ's senior unsecured debt rating is sensitive to any changes in its National Long-Term Rating.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
KTZ's ratings are linked to KTB's ratings.