TRIS Rating affirms the company rating on Ratchthani Leasing PLC (THANI) and the ratings on THANI’s outstanding senior unsecured debentures at “A-”. At the same time, TRIS Rating assigns the rating on THANI’s proposed issues of up to Bt2,500 million in senior unsecured debentures due within three years at “A-”.
The ratings reflect sustained improvements in THANI’s market position and financial performance. The ratings also reflect the steady recovery in THANI’s asset quality as a result of continuous developments in operating processes and risk management systems.
The ratings take into consideration the business support and financial support THANI receives from its major shareholder, Thanachart Bank PLC (TBANK). The ratings of THANI are enhanced from its stand-alone rating because TRIS Rating holds the view that the company is a strategically important subsidiary of TBANK.
However, the strengths are weighted down by concerns over intense competition and a heavy reliance on commercial truck loans. These factors might constrain the company’s profitability.
According to the unaudited financial performance, THANI’s loan portfolio was Bt46,412 million at the end of 2018, up 14.8% from 2017. The return on average assets improved to 3.77% in 2018 from 3.09% in 2017. The ratio of non-performing loans (NPLs) to total loans was 3.83% at the end of September 2018.
RATING OUTLOOK
The “stable” outlook reflects TRIS Rating’s expectation that THANI will expand the loan portfolio and maintain its market position in the target market segments. Loan quality is expected to be controlled and maintained at an acceptable level. In addition, profitability is expected to hold steady. The support THANI receives from its parent bank is expected to continue, especially the provision of credit facilities.
RATING SENSITIVITIES
The possible credit upside case is contingent on significant improvements in THANI’s business and financial profiles. In contrast, THANI’s ratings or outlook could be revised downward if its business position weakens steadily or if asset quality or capitalization deteriorates substantially, affecting profitability. Any material change in the degree of strategic importance of THANI to TBANK, which would alter the support TBANK provides to THANI, would also affect the ratings and/or outlook.
RELATED CRITERIA
- Nonbank Lending Company, 7 May 2018
- Group Rating Methodology, 10 July 2015
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