TRIS Rating Co., Ltd. has assigned the company rating of TISCO Financial Group PLC (TISCO) at
“A-” with “positive” outlook. The rating reflects TISCO’s position as an investment holding company of TISCO Group, its control of TISCO Bank PLC (TISCOB) through a 99.98% ownership stake, and a stable stream of dividends from TISCOB. TISCO’s rating is one notch lower than the rating of its core bank subsidiary, TISCOB. The one notch difference reflects TISCO’s dependence on dividends from TISCOB and the regulatory barrier to payments of those dividends. The rating takes into consideration the capability and experience of TISCO’s management team, sound risk management system, well-diversified sources of income and ability to keep a strong market position in the auto hire-purchase business. These strengths, however, are partially offset by the unforeseen risks which may arise after the implementation of the Deposits Protection Agency Act (DPA) in August 2011. The rating is also pressured by intense competition in the banking, hire-purchase, and securities industries as well as the uncertainties in the economic and political environments. These factors might limit the group’s expansion opportunities and profitability in the future.
The “positive” outlook reflects the anticipation that TISCO will deliver the expected financial performance in the medium term. The outlook also reflects TISCO’s good risk management system, which will help alleviate future downside risks from the uncertainty in the economic and financial environments. Going forward, TISCO’s rating and outlook will be influenced by the challenges it faces from any unforeseen outcomes arising after the DPA takes effect, such as the ability to maintain its strengths and secure stable sources of funding at reasonable prices.
TRIS Rating reported that TISCO and affiliated companies implemented the holding company restructuring plan in 2008. TISCO was set up to be a holding company and the parent company of the group, in place of TISCOB. As at 11 March 2011, TISCO’s largest shareholder was CDIB & Partners Investment Holding Pte Ltd. with a 10% stake, while the remaining shares belonged to local and foreign investors. At the end of 2010, TISCO was ranked 10th among all 13 Thai universal banks based on consolidated asset size, with 2.2% market share in loans and 0.7% share in deposits. On a consolidated basis, TISCO’s total assets were Bt171 billion, up by 23% from Bt139 billion at the end of 2009. TISCO has further diversified its revenue base. Fee-based income, as represented by the non-interest income to total income ratio, rose to 29% in 2010, up from 25% in 2009. In 2010, TISCO’s revenues came from its subsidiaries; TISCOB, TISCO Securities Co., Ltd., and TISCO Asset Management Co., Ltd., accounted for 75%, 11% and 8% of total revenue, respectively. The remaining 6% was contributed by Hi-Way Co., Ltd. and TISCO Tokyo Leasing Co., Ltd.
TRIS Rating said, TISCO’s financial profile has significantly improved, as illustrated by the 45% growth in net profit in 2010. Net profit rose to Bt2,888 million in 2010 from Bt1,988 million in 2009. TISCO’s return on average assets (ROAA) was 1.86% in 2010, up from 1.5% in 2009. At the same time, the bank’s return on average equity (ROAE) was the highest in the industry for 11 Thai universal banks (excluding United Overseas Bank (Thai) PLC and Standard Chartered Bank (Thai) PLC) based on TRIS Rating’s database. ROAE rose to 21.1% in 2010, up from 16.53% in 2009. The improvements were driven by increases in both interest income and fee-based income, as well as improved efficiency in controlling credit cost and operating costs.
In terms of asset quality, TISCO has established a good risk management framework, with a consolidated and centralized risk management system. As a result, TISCO has good quality assets, as shown by the 1.76% ratio of non-performing loans (NPL) to total loans in 2010, the lowest in the industry. At the same time, the company’s non-performing assets (NPA) (classified loans more than three months overdue, plus outstanding troubled debt being restructured, and foreclosed property) were 0.19 times its capital funds plus the allowance for doubtful accounts. This ratio improved from 0.24 times in 2009, and remains far below the industry average of 0.6 times.
TISCO has developed a proficient management team with a conservative management style that has enabled the company to support the competitive positions of its subsidiaries. The company’s consolidated risk management framework has improved continuously to match with international standards. However, the highly competitive banking industry may limit the growth and profitability of TISCOB in the future, said TRIS Rating. — End
Company Rating: A- Rating Outlook: Positive
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