Bangkok--Feb 10--TRIS
Thai Rating and Information Services (TRIS) announced in a
CreditUpdate Tuesday, 10 February 1998, its analysis on Thailand's
financial crisis and its downgraded ratings for IFCT and TFB.
TRIS analysed that Thailand's economic and financial crises have
worsened the financial industry's operating environment more than TRIS
earlier expected. The recent closure of 56 finance and securities
companies by the authorities is viewed as a crucial path towards
restructuring the country's financial system. However, it presents
resulting impacts on operating financial institutions' asset performance
as well as the system liquidity. High interest rates resulting from tight
domestic liquidity as well as volatile and depreciating baht have
continued to hamper both financial institutions and corporates' balance
sheets. As concerns over the success of implementing economic and
financial system reforms persist, foreign capital inflow has yet to
recover at meaningful levels. The recapitalization required by the Bank
of Thailand, more urgently on 15 local banks, should serve as a positive
factor in shoring up the financial system's health and propelling the
country's deteriorated economy. Still, uncertainties remain with the
timing and amounts of capital financial institutions are able to raise
either locally or from foreign sources. Therefore, the risk profile of
Thai financial industry is expected to continue vulnerable in the near
term and stay under pressure through the periods of the reforms. Foreign
ownership is recently allowed to exceed 50% in the local financial
institutions for up to ten years. This will likely have a prominent
impact on the market dynamics over the medium term, particularly the
intense competition.
Financial institutions are a contingent liability of the
government and play an important role of financial intermediary in the
country's economic development. Whereas, they are subject to impacts of
sovereign credit risk in terms of a high degree of regulatory control over
business operations and changes in market environment, as well as
sensitivity of their asset quality to economic conditions. With these
respects, a significant rating consideration exists between financial
institution and sovereign creditworthiness. The severe and prolonged
difficulties in the Thai financial industry has posed subsequent fiscal
cost as well as monetary pressure to the government more than previously
assumed. Thai economy is expected to contract in the range of 2-3 percent
in 1998 as investment and consumption of both public and private sectors
decline further. Inflation is foreseen to continue increasing from a
single-digit rate to 10-13%. Thailand's risen public debts have
significantly weakened the government's financial position and thus
hightened the sovereign's economic/credit risk to a larger degree.
The credit standings of following financial institutions are also
downgraded: Industrial Finance Corporation of Thailand (IFCT) and Thai
Farmers Bank PLC (TFB)
The rating downgrade of the Industrial Finance Corporation of
Thailand (IFCT) reflects its deteriorated asset quality and the increasing
sensitivity of its financial profile to the country's worse-than-expected
economic and financial difficulties. However, the Thai government as
IFCT's single major shareholder and IFCT's public policy role in promoting
industrial development remains the positive rating factor. This close
relationship significantly helps IFCT maintain the financial flexibility
needed under its current tight liquidity.
The ratings of Thai Farmers Bank PLC's (TFB) senior and
subordinated debts are lowered to "A-" and "BBB+" and also removed from
CreditAlert placed on 19 September 1997 Following TFB's announced plan to
increase its shareholding in Phatra Thanakit PLC (PHATRA) from 8% to 49%.
The downgrade reflects a deep deterioration in TFB's asset quality
and its higher financial risk as the results of Thailand's worse-than-
expected economic and financial difficulties. However, its third largest
commercial bank status and relatively strong competitive position help
sustain the bank's present ratings.
Note: Industrial Finance Corporation of Thailand (IFCT) TRIS's rating
Sr debt: Downgraded to A from AA-
Thai Farmers Bank PLC (TFB)
Sr debt: Downgraded to A- from AA-
TFB#1: 7,500 mb sub debs due 2001 Downgraded to BBB+ from A+
"CreditUpdate" reviews ratings of companies or debt issues that have
already been rated by TRIS. CreditUpdate occurs when new debt instruments
are issued or if significant events have taken place that may impact a
company's current ratings or when current ratings are cancelled. The
update includes information to supplement the previously published
ratings. End.
Thai Rating and Information Services (TRIS) announced in a
CreditUpdate Tuesday, 10 February 1998, its analysis on Thailand's
financial crisis and its downgraded ratings for IFCT and TFB.
TRIS analysed that Thailand's economic and financial crises have
worsened the financial industry's operating environment more than TRIS
earlier expected. The recent closure of 56 finance and securities
companies by the authorities is viewed as a crucial path towards
restructuring the country's financial system. However, it presents
resulting impacts on operating financial institutions' asset performance
as well as the system liquidity. High interest rates resulting from tight
domestic liquidity as well as volatile and depreciating baht have
continued to hamper both financial institutions and corporates' balance
sheets. As concerns over the success of implementing economic and
financial system reforms persist, foreign capital inflow has yet to
recover at meaningful levels. The recapitalization required by the Bank
of Thailand, more urgently on 15 local banks, should serve as a positive
factor in shoring up the financial system's health and propelling the
country's deteriorated economy. Still, uncertainties remain with the
timing and amounts of capital financial institutions are able to raise
either locally or from foreign sources. Therefore, the risk profile of
Thai financial industry is expected to continue vulnerable in the near
term and stay under pressure through the periods of the reforms. Foreign
ownership is recently allowed to exceed 50% in the local financial
institutions for up to ten years. This will likely have a prominent
impact on the market dynamics over the medium term, particularly the
intense competition.
Financial institutions are a contingent liability of the
government and play an important role of financial intermediary in the
country's economic development. Whereas, they are subject to impacts of
sovereign credit risk in terms of a high degree of regulatory control over
business operations and changes in market environment, as well as
sensitivity of their asset quality to economic conditions. With these
respects, a significant rating consideration exists between financial
institution and sovereign creditworthiness. The severe and prolonged
difficulties in the Thai financial industry has posed subsequent fiscal
cost as well as monetary pressure to the government more than previously
assumed. Thai economy is expected to contract in the range of 2-3 percent
in 1998 as investment and consumption of both public and private sectors
decline further. Inflation is foreseen to continue increasing from a
single-digit rate to 10-13%. Thailand's risen public debts have
significantly weakened the government's financial position and thus
hightened the sovereign's economic/credit risk to a larger degree.
The credit standings of following financial institutions are also
downgraded: Industrial Finance Corporation of Thailand (IFCT) and Thai
Farmers Bank PLC (TFB)
The rating downgrade of the Industrial Finance Corporation of
Thailand (IFCT) reflects its deteriorated asset quality and the increasing
sensitivity of its financial profile to the country's worse-than-expected
economic and financial difficulties. However, the Thai government as
IFCT's single major shareholder and IFCT's public policy role in promoting
industrial development remains the positive rating factor. This close
relationship significantly helps IFCT maintain the financial flexibility
needed under its current tight liquidity.
The ratings of Thai Farmers Bank PLC's (TFB) senior and
subordinated debts are lowered to "A-" and "BBB+" and also removed from
CreditAlert placed on 19 September 1997 Following TFB's announced plan to
increase its shareholding in Phatra Thanakit PLC (PHATRA) from 8% to 49%.
The downgrade reflects a deep deterioration in TFB's asset quality
and its higher financial risk as the results of Thailand's worse-than-
expected economic and financial difficulties. However, its third largest
commercial bank status and relatively strong competitive position help
sustain the bank's present ratings.
Note: Industrial Finance Corporation of Thailand (IFCT) TRIS's rating
Sr debt: Downgraded to A from AA-
Thai Farmers Bank PLC (TFB)
Sr debt: Downgraded to A- from AA-
TFB#1: 7,500 mb sub debs due 2001 Downgraded to BBB+ from A+
"CreditUpdate" reviews ratings of companies or debt issues that have
already been rated by TRIS. CreditUpdate occurs when new debt instruments
are issued or if significant events have taken place that may impact a
company's current ratings or when current ratings are cancelled. The
update includes information to supplement the previously published
ratings. End.