Fitch Ratings (Thailand) has affirmed the National Long-Term Rating of ICBC (Thai) Leasing Company Limited (ICBCTL) at 'AAA(tha)' and National Short-Term Rating at 'F1+(tha)'. The Outlook is Stable.
KEY RATING DRIVERS
Core Subsidiary of Parent Bank: ICBCTL's ratings are equalised with those of its parent, Industrial and Commercial Bank of China (Thai) Public Company Limited (ICBCT; AAA(tha)/Stable), as we believe that ICBCTL is a key and integral part of ICBCT.
Strong Linkages and Control: The company is wholly owned by the parent bank, with management control and strong financial linkages. ICBCTL operates the bank's hire purchase, finance lease and factoring business, which comprises 26% of its parent bank's consolidated loans at end-2021. The clear brand linkages also mean there would be substantial reputational risks to the parent from any default at ICBCTL.
From a regulatory standpoint, ICBCTL is classified as being a part of ICBCT's 'solo consolidation' group, which indicates no regulatory restrictions on fund transfers between the two entities, and that ICBCTL is closely supervised by the central bank.
Ongoing Synergies and Integration: The ratings also incorporate Fitch's view that there is a high level of integration between ICBCTL and the parent, such as in terms of business operations and risk management framework. We see synergy between the two entities - for example, ICBCTL's wholesale financing business utilises ICBCT's relationship with large corporates, and its retail operations support the bank's retail client base, while ICBCT takes advantage of ICBCTL's service offerings and high-margin products.
Shareholder Support Ability Unchanged: We believe ICBCT has the ability to provide extraordinary support to ICBCTL, if needed. ICBCT's ratings are driven by expectations of extraordinary support from its parent, Industrial and Commercial Bank of China Limited (ICBC; A/Stable/bbb). ICBCTL's equity base is a significant 22% of ICBCT's consolidated equity, but this is minimal relative to the overall balance sheet of the ultimate support provider, ICBC.
Senior Debt: ICBCTL's senior debt is rated at the same level as the company's National Long-Term Rating, as it represents the unsecured and unsubordinated obligations of the borrower.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A decline in the parent bank's ability to support ICBCTL could lead to the subsidiary's issuer and senior debt ratings being downgraded. This would be indicated by negative rating action on ICBCT's National Ratings, although Fitch would also take into account both the parent and subsidiary's credit profile within our Thai national ratings universe.
Negative rating action may also occur on ICBCTL if there is any material weakening in ICBCT's propensity to provide ICBCTL with extraordinary support. For example, any plans for a material reduction in ICBCTL's ownership to below 75%, along with the presence of a significant minority shareholder combined with a lower level of parental control and integration, or regulatory changes that make it more difficult for support to flow through to the subsidiary, could lead to a re-assessment of support prospects.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
There is no upside to ICBCTL's ratings, as the company is rated at the top end of the scale.
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
ICBCTL's ratings are linked to ICBCT's ratings.
Additional information is available on www.fitchratings.com