TRIS Rating Co., Ltd. has assigned a “A+” rating to the proposed issue of up to Bt3,000 million in senior debentures of Thanachart Capital PLC (TCAP). At the same time, TRIS Rating has affirmed the company rating of TCAP and the ratings of TCAP’s existing senior debentures at “A+”. The outlook remains “stable”. The ratings reflect TCAP’s position as an investment holding company of Thanachart Group, its management control of Thanachart Bank PLC (TBANK) through a 50.96% ownership stake, and a stable stream of dividends from TBANK. TCAP’s company rating is one notch lower than the company rating of its core bank subsidiary, TBANK. The one notch difference reflects TCAP’s dependence on dividends from TBANK and the regulatory barriers to payments of dividends. The “stable” outlook reflects the expectation that TBANK, as the major source of revenue for TCAP, will be able to leverage the synergies among TBANK and BNS to strengthen its market positions in the core businesses. In addition, strong financial support and business know-how from both strategic partners -- BNS and TCAP -- will sustainably enhance TBANK’s overall business and financial performance in the future.
The ratings take into consideration the capable management team, the improvement in its standard risk management system, and the strong business and financial support from its Canadian strategic partner — Bank of Nova Scotia (BNS), holding 49% stake in TBANK. The ratings also reflect TBANK’s enhanced franchise value and nationwide banking network after the acquisition of Siam City Bank PLC (SCIB) by TBANK in 2010. These strengths, however, are constrained by weakening asset quality, intense competition in the banking, hire-purchase, and securities industries, as well as the uncertain global financial arenas. These factors might limit the Group’s profitability and expansion opportunities in the future.
TRIS Rating reported that based on consolidated asset size as of June 2012, TCAP was ranked 6th among all 15 Thai commercial banks, with 7.9% market share in loans and 6.8% market share in deposits. At the end of June 2012, TCAP’s total consolidated assets were Bt928.9 billion, up by 7.9% year-on-year (y-o-y) from Bt860.5 billion as of June 2011. TCAP’s financial profile has improved in the first half of 2012. The company’s consolidated net profit for the first six months of 2012 was Bt2.9 billion, up by 6.5% y-o-y. The increase was mainly driven by lower credit cost and more fee-based income. Non-annualized return on average assets (ROAA) for the first half of 2012 was 0.32%, up slightly from 0.31% for the same period in 2011. However, return on average equity (ROAE), at the same time, decreased slightly to 3.76% from 3.80%. The drop resulted from percentage increase in the shareholders’ equity over the net profit. The ratio of equity to total assets increased to 8.49% as of June 2012 from 8.36% as of June 2011.
TRIS Rating said, in 2010 and 2011, TCAP has been constrained by an increase in non-performing loans (NPLs) after the acquisition of SCIB by TBANK. Most of the NPLs were from the commercial loan portfolio of SCIB. Due to smooth business integration, consolidated NPLs declined continuously. TCAP’s ratio of NPLs to total loans was 5.23% as of June 2012, down from 6.18% in 2011 and 6.46% in 2010. However, this ratio is above the industry average of 3.37% for 15 Thai commercial banks. TCAP’s non-performing assets (NPAs) (the sum of classified loans more than three months overdue, plus restructured loans and foreclosed property) as of June 2012 were 0.78 times capital funds plus the allowance for doubtful accounts, down from 0.81 times in 2011, but remained higher than the industry average of 0.47 times. An improved risk management system, an experienced management team, and business diversification are crucial factors that will protect the company from downside risks in the medium term, said TRIS Rating. — End. ? Thanachart Capital PLC (TCAP)
Company Rating: Affirmed at A+ Issue Ratings: TCAP131A: Bt3,000 million senior debentures due 2013 Affirmed at A+ TCAP14NA: Bt9,000 million senior debentures due 2014 Affirmed at A+ Up to Bt3,000 million senior debentures due within 2022 A+ Rating Outlook: Stable
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