TRIS Reassigns IFCT's Corporate Rating at "A+"
Thai Rating and Information Services Co., Ltd. (TRIS) announced Friday 18 August 2000 that it reassigned the corporate rating of the Industrial Finance Corporation of Thailand (IFCT) at "A+". The rating reflects TRIS's adoption of a national scale rating system that focuses exclusively on company and issue ratings in local currency and that is relevant only for comparison within the domestic market. Under the national scale rating system, which takes effect on 25 July 2000, the highest credit rating within the country is "AAA". TRIS said that although IFCT is not a state enterprise, the Ministry of Finance (MOF), which holds directly and indirectly almost 30% of its shares, occasionally guarantees its borrowings and always acknowledges, through implementing various MOF policies, IFCT's strategic importance. The rating also takes into account IFCT's significant recapitalization and its full loan loss provisioning. However, these strengths are offset by IFCT's rather weak financial performance attributed in part to the above mentioned requirement of provisioning for loan losses as well as a weak earning capacity. Established to be a development financial institution, IFCT is a tool the government uses formally and informally to implement development policies. IFCT plays an important role in lending to small and medium enterprises (SMEs). In 2000, the Bank of Thailand (BOT) is channeling Bt9,000 million loans to SMEs through IFCT. In addition, IFCT also plans to provide an additional Bt6,000 million to SMEs. This demonstrates one way IFCT supports efforts to stimulate economic recovery. TRIS reported that in 1999, IFCT increased its paid-up capital from Bt6,168 million to Bt11,616 million with the surplus of Bt2,991 million. TRIS believed that capital increase was sufficient to cover loan losses and pushed IFCT's capital adequacy ratio higher than the BOT requirement. IFCT's level of non-performing loans (NPL) to total loans at the end of 1999 was 27.78%, lower than the whole financial system. IFCT has had a full provision for loan losses since the end of 1999. However, its profitability dropped significantly in 1999. Net losses increased from Bt4,685 million in 1998 to Bt7,908 million in 1999, mainly because of the huge provision for loan losses and a negative interest spread. IFCT had a negative interest spread because of falling interest incomes and high interest expenses. Profitability should improve as management implements various actions, such as setting up policy for more debt restructuring, extending new loans to customers and repaying high borrowing cost from lower cost sources.
Industrial Finance Corporation of Thailand (IFCT): Company rating Senior debt A+