Fitch Ratings has assigned Thailand-based SCB X Public Company Limited (SCBX, BBB/Stable) a National Long-Term Rating of 'AA+(tha)' and National Short-Term Rating of 'F1+(tha)'. The Outlook is Stable.
KEY RATING DRIVERS
SCBX's 'AA+(tha)' National Long-Term Rating is equalised with that of its main subsidiary, The Siam Commercial Bank Public Company Limited (SCB, BBB/AA+(tha)/Stable). This is consistent with Fitch's approach of equalising the Issuer Default Rating (IDR) and Viability Rating (VR) of SCBX with that of SCB. The national ratings also taken into account SCBX's credit profile relative to Thailand's nationally rated peers.
SCBX's IDRs and VR are based on the standalone credit profile of the group, as reflected by the 'bbb' VR of the core operating entity, SCB. SCBX's VR is equalised with the group's VR. We expect SCBX to maintain a low double-leverage ratio of below 110% over the medium term. In addition, the holding company is regulated by the Bank of Thailand and has to comply with Basel III capital and liquidity ratios. We expect liquidity management to be broadly prudent and resilient to stress scenarios.
Fitch first assigned ratings to SCBX on 25 August 2022. For further details on SCBX's key rating drivers and rating sensitivities, please see our previous commentary "Fitch Assigns SCBX First-Time 'BBB' IDR; Outlook Stable" dated 25 August 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade of SCBX's Long-Term IDR could to lead a downgrade of the company's National Long-Term Rating, though Fitch would also take into account the company's credit profile compared with that of peers rated on the national scale.
SCBX's Long-Term IDR is sensitive to any changes in our assessment of the group's standalone credit profile, which is indicated by the VR of its core bank, SCB. Therefore, a negative rating action on SCB's VR would be likely to lead to a similar rating action on SCBX's ratings.
A material decline in SCB's contribution to the group's consolidated credit profile could lead to a reassessment of the notching approach between SCBX and the core operating bank, SCB. For example, a fall in SCB's contribution to the group in terms of asset size to below 75% for a sustained period may indicate rising exposure from non-bank businesses and would be likely to lead to a re-assessment of the holding-company rating approach, as this may challenge our view of whether the risk of a failure at the bank and the holding company remains aligned.
An increase in the double-leverage ratio to above 120% or a significant weakening in SCBX's liquidity management policy, both on a consolidated and standalone level, could also lead to a wider notching differential between the VRs of SCBX and SCB.
SCBX's National Short-Term Rating may be downgraded if the National Long-Term Rating is downgraded below 'AA-(tha)'.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade in SCBX's Long-Term IDR could lead to an upgrade of the National Long-Term Rating. However, this would also have to take into account SCBX's credit profile relative to that of other entities rated on the Thai national scale.
An upgrade in SCB's VR could lead to similar action on SCBX's Long-Term IDR and VR. Without the upgrade of SCB's VR, there should be no further rating upside because SCBX's assigned rating is already at the same level as SCB's rating.
DATE OF RELEVANT COMMITTEE
03 November 2022
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
SCBX's ratings are linked to SCB's credit profile.
Additional information is available on www.fitchratings.com