Fitch Ratings (Thailand) has placed SCB Securities Public Company Limited's (SCBS) National Long-Term Rating of 'AA(tha)' on Rating Watch Evolving (RWE), and affirmed the National Short-Term Rating at 'F1+(tha)'.
KEY RATING DRIVERS
The RWE reflects uncertainty over the rating impact of a group restructuring, which will change SCBS's direct parent from The Siam Commercial Bank Public Company Limited (SCB, BBB/AA+(tha)/Stable) to a newly set up holding company, SCBX Public Company Limited. The corporate restructuring involves a shift in the SCB group's strategic focus and plans for SCBS, which will lead to a reassessment of the parent group's ability and propensity to provide support to SCBS. Fitch expects to resolve the RWE after SCBX is established and the restructuring is completed.
SCBS's ratings reflect Fitch's view that the company is a strategically important subsidiary of SCB. SCBS plays a significant role in providing equity-related services to group clients, and there are strong marketing synergies with SCB. Furthermore, there is name and brand sharing with SCB, direct full ownership, high levels of management control and operational integration with the parent group.
The one-notch differential between SCBS's and SCB's National Long-Term Ratings reflects the subsidiary's role in providing complementary capital market services to the bank's clients. Fitch views these services as strategically important but not core to the bank.
Fitch expects SCBS's ratings will still be driven by shareholder support after the group restructure. Fitch believes the strong linkages between SCBS and its parent group will be largely maintained, given 100% ownership will remain intact, the SCB group will have effective control, and close management and operational integration will be sustained.
The impact of the group restructure on SCBS's ratings will depend on Fitch's assessment of SCBX's credit profile, the credit strength of the group's main operating bank, SCB, and factors affecting the SCB group's propensity to support SCBS. These factors are likely to focus on SCBS's role in the group incorporating SCBX's digitalisation strategy and expansion plans.
The affirmation of the National Short-Term Rating reflects Fitch's expectation that any potential changes in the National Long-Term Rating would not lead to a change in the National Short-Term Rating. The National Short-Term Rating will remain unchanged as long as SCBS's National Long-Term Rating remains at 'AA-(tha)' or higher.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
SCBS's National Long-Term Rating could be downgraded if Fitch views SCBX's credit profile to be weaker than that of SCB, and SCBS remains a strategically important but non-core subsidiary of SCBX. This may occur if, for example, Fitch views other subsidiaries of SCBX as significantly more important to the group - although we believe SCBS will still play a strategic role in the group's development in the near to medium term.
A reduction in the SCB group's ownership to below 75%, or a material weakening in financial and operational support commitments or management control from the parent, could lead to a downgrade.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
SCBS's ratings are linked to SCB's local-currency credit profile as denoted by its National Long-Term Rating.
SCBS's National Long-Term Rating may be upgraded after the corporate restructure if Fitch believes that SCBX's credit profile is at least as strong as SCB's, and that SCBS will play a core role in the restructured SCB group. Fitch will assess SCBX's credit profile when the details of the restructuring are finalised, taking into account the entity's strategic plans and expected financial profile.
Meanwhile, a more prominent role for SCBS in the group's strategic objectives, franchise and operations may be positive for Fitch's assessment of the parent's propensity to support the subsidiary. Fitch will continue to assess SCBS's contribution relative to the group's overall operations, including that of SCB.
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
SCBS's National Ratings are linked to the local-currency credit profile of SCB, as indicated by the parent bank's National Long-Term Rating.
Additional information is available on www.fitchratings.com