Thai Rating and Information Services Co., Ltd. (TRIS) announced that it has assigned the company rating of Tisco Finance PLC (TISCO) at "A-". The rating reflects TISCO's capable management team, strong market position in the hire purchase business, and strong capital base following capital injections from the Ministry of Finance (MOF) and joint investors. These strengths are partially offset by uncertainty in the financial industry and intensifying competition in the finance and securities industries, especially in the hire purchase and securities businesses. The rating also incorporates the company's improved overall financial profile.
TRIS reported that TISCO fulfilled the conditions to receive tier 1 support under the MOF's 14 August 1998 financial reform package by fully provisioning for all classified assets in 1999. TISCO decided to apply for the MOF's financial support scheme to increase its capital fund so that it could cope with its non-performing loans and to gain sufficient support for future business expansion. In June 1999, TISCO issued preferred shares worth Bt6,000 million to the MOF and joint investors. TISCO also issued subordinated debentures worth Bt331 million to the MOF under the tier 2 capital support scheme. The infusion strengthened TISCO's capitalization, and enabled it to write-off a significant amount of bad debt, helping the company boost its capital adequacy ratio significantly from 8.1% in 1998 to 16.5% as of June 2001.
TISCO's asset quality has improved rapidly and significantly over the past few years. Its non-performing loans decreased substantially from Bt14,144 million in 1998 or 44.1% of total loans to Bt2,572 million as of June 2001 or 9.4% of total loans, which was far better than the 13.1% average among financial institutions and 15.9% average among finance companies. The reduction came through a significant write off of bad debts in 1999 and achieving debt recovery from the company's restructuring efforts over the last two years. The write off and debt recovery also drove the company's better financial performance in 2000. Therefore, the company's operating profit to average assets and return on average assets improved from -9.69% and -10.46% respectively in 1999 to 2.51% and 2.09% in 2000. TISCO's equity to total assets have also continuously improved from 6.73% in 1998 to 12.53% in 2000.
TRIS said that the resolution of non-performing loans remains an important issue in returning stability to the financial system. While the government's setting up of the Thai Asset Management Corporation (TAMC) may help ease the burden of non-performing loans and allow financial institutions to focus more on their core activities, how efficiently the TAMC can manage non-performing loans is unknown. Key economic indicators in the first half of 2001 pointed to slower economic growth for this year. Meanwhile, financial institutions still have excess liquidity, which leads to intensified competition. In addition, global competitors have stepped up pressure on domestic finance companies by launching aggressive campaigns for their consumer finance products. The near-term prospects for the securities industry remains a concern due to price competition since the liberalization of brokerage commission rates. The fragile economic recovery and rising competition in the financial system will effect TISCO's profitability.
However, TRIS said that TISCO's experience in the industry of more than 30 years has developed a proficient management team and system with proven ability to compete in this very competitive industry. A good risk management system and experienced managemnet team should mitigate future downside risk. The proportion of hire purchase loans in the company's loan portfolio has increased continuously during the past three years. Furthermore, the company plans to focus on selective business segments -- particularly consumer finance, fee-based financial services and asset management -- to ensure growth.
Tisco Finance PLC (TISCO) Company Rating Senior debt A-
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TRIS reported that TISCO fulfilled the conditions to receive tier 1 support under the MOF's 14 August 1998 financial reform package by fully provisioning for all classified assets in 1999. TISCO decided to apply for the MOF's financial support scheme to increase its capital fund so that it could cope with its non-performing loans and to gain sufficient support for future business expansion. In June 1999, TISCO issued preferred shares worth Bt6,000 million to the MOF and joint investors. TISCO also issued subordinated debentures worth Bt331 million to the MOF under the tier 2 capital support scheme. The infusion strengthened TISCO's capitalization, and enabled it to write-off a significant amount of bad debt, helping the company boost its capital adequacy ratio significantly from 8.1% in 1998 to 16.5% as of June 2001.
TISCO's asset quality has improved rapidly and significantly over the past few years. Its non-performing loans decreased substantially from Bt14,144 million in 1998 or 44.1% of total loans to Bt2,572 million as of June 2001 or 9.4% of total loans, which was far better than the 13.1% average among financial institutions and 15.9% average among finance companies. The reduction came through a significant write off of bad debts in 1999 and achieving debt recovery from the company's restructuring efforts over the last two years. The write off and debt recovery also drove the company's better financial performance in 2000. Therefore, the company's operating profit to average assets and return on average assets improved from -9.69% and -10.46% respectively in 1999 to 2.51% and 2.09% in 2000. TISCO's equity to total assets have also continuously improved from 6.73% in 1998 to 12.53% in 2000.
TRIS said that the resolution of non-performing loans remains an important issue in returning stability to the financial system. While the government's setting up of the Thai Asset Management Corporation (TAMC) may help ease the burden of non-performing loans and allow financial institutions to focus more on their core activities, how efficiently the TAMC can manage non-performing loans is unknown. Key economic indicators in the first half of 2001 pointed to slower economic growth for this year. Meanwhile, financial institutions still have excess liquidity, which leads to intensified competition. In addition, global competitors have stepped up pressure on domestic finance companies by launching aggressive campaigns for their consumer finance products. The near-term prospects for the securities industry remains a concern due to price competition since the liberalization of brokerage commission rates. The fragile economic recovery and rising competition in the financial system will effect TISCO's profitability.
However, TRIS said that TISCO's experience in the industry of more than 30 years has developed a proficient management team and system with proven ability to compete in this very competitive industry. A good risk management system and experienced managemnet team should mitigate future downside risk. The proportion of hire purchase loans in the company's loan portfolio has increased continuously during the past three years. Furthermore, the company plans to focus on selective business segments -- particularly consumer finance, fee-based financial services and asset management -- to ensure growth.
Tisco Finance PLC (TISCO) Company Rating Senior debt A-
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