TRIS Rating Co., Ltd. has upgraded the rating of Small and Medium Enterprise Development Bank of Thailand (SME Bank) and the rating of its Bt5,000 million senior debentures (SME087A) to "AA-" from "A+" with "stable" outlook. The ratings reflect the strong financial support SME Bank has received from the government through the Ministry of Finance (MOF) in the form of a capital injection. The ratings also take into account the influential role that SME Bank plays as a key promoter of small- and medium-sized business enterprises (SMEs), one of Thailand's economic growth engines. With strong government support, the overall ratings are enhanced from the stand-alone rating of SME Bank. There is clearer evidence demonstrating the bank's efforts to improve operating efficiency, reduce risks, and tackle asset quality problems. However, these strengths are partly offset by the expected volatility of the bank's financial performance during its investment and reorganizing phase, as well as the slow pace of non-performing loan (NPL) workouts at present.
The "stable" outlook reflects SME Bank's influential status as one of the main policy banks that helps spur growth of the rural economy through long-term funding provided to SMEs, a key economic policy implemented by the current government. The outlook is premised on the expectation that the bank's relationship with the government and related state entities, along with the financial support in the form of capital and subsidies from the government, is unlikely to change in the near future.
TRIS Rating reported that SME Bank was established in 2002 under the Small and Medium Enterprise Development Bank of Thailand Act of Parliament B.E. 2545 (2002), to take over the SME-supporting function as well as finances and operations of the Small Industry Finance Corporation (SIFC), which was constituted under the Small Industry Finance Corporation Act B.E. 2534 (1991). Prior to the upgrade of SIFC into SME Bank, the MOF twice injected new capital into SIFC and two years after the creation of SME Bank, the MOF added more equity. Early this year, the Cabinet approved a further recapitalization, which is scheduled to be paid in October 2005, and in 2006, the MOF intends to add more capital to the bank, to bring total capital to Bt10 billion as stipulated by the SME Act. The succession of recapitalizations confirms the strong financial support the government provides to SME Bank.
TRIS Rating said since the appointment of a new president in November 2003, the bank has progressed rapidly through a series of transformations, starting with the segregation of its lending department into seven key industry clusters to better promote the strategic industries identified by the government. For an even clearer focus, in 2005, the clusters were broken down further into 10 clusters. Moreover, the bank designed a matrix structure, crossing the 10 business clusters with the 19 strategic provincial clusters determined by the government. SME Bank is also developing an IT infrastructure and a risk management framework and is realigning its organizational structure into more distinct functions. All these initiatives bode well for the bank in the future as they are expected to help streamline operations, minimize risks, and improve asset quality.
TRIS Rating said that the challenge for the bank going forward is to integrate the new banking platform that centers around risk management with its existing corporate and credit cultures and business strategies that are largely determined by the government. SME Bank will need to balance its mission to promote the high-risk segments of SMEs with the risk management framework that is being developed. The increased operating efficiency and the ability to improve asset quality will help the bank maintain its strategic position in the event the political environment changes in the future, TRIS Rating said. --End Small and Medium Enterprise Development Bank of Thailand (SME Bank) Company Rating: Upgraded to "AA-" from "A+" Issue Rating: SME087A: Bt5,000 million senior debentures due 2008 Upgraded to "AA-" from "A+" Rating Outlook: Stable
The "stable" outlook reflects SME Bank's influential status as one of the main policy banks that helps spur growth of the rural economy through long-term funding provided to SMEs, a key economic policy implemented by the current government. The outlook is premised on the expectation that the bank's relationship with the government and related state entities, along with the financial support in the form of capital and subsidies from the government, is unlikely to change in the near future.
TRIS Rating reported that SME Bank was established in 2002 under the Small and Medium Enterprise Development Bank of Thailand Act of Parliament B.E. 2545 (2002), to take over the SME-supporting function as well as finances and operations of the Small Industry Finance Corporation (SIFC), which was constituted under the Small Industry Finance Corporation Act B.E. 2534 (1991). Prior to the upgrade of SIFC into SME Bank, the MOF twice injected new capital into SIFC and two years after the creation of SME Bank, the MOF added more equity. Early this year, the Cabinet approved a further recapitalization, which is scheduled to be paid in October 2005, and in 2006, the MOF intends to add more capital to the bank, to bring total capital to Bt10 billion as stipulated by the SME Act. The succession of recapitalizations confirms the strong financial support the government provides to SME Bank.
TRIS Rating said since the appointment of a new president in November 2003, the bank has progressed rapidly through a series of transformations, starting with the segregation of its lending department into seven key industry clusters to better promote the strategic industries identified by the government. For an even clearer focus, in 2005, the clusters were broken down further into 10 clusters. Moreover, the bank designed a matrix structure, crossing the 10 business clusters with the 19 strategic provincial clusters determined by the government. SME Bank is also developing an IT infrastructure and a risk management framework and is realigning its organizational structure into more distinct functions. All these initiatives bode well for the bank in the future as they are expected to help streamline operations, minimize risks, and improve asset quality.
TRIS Rating said that the challenge for the bank going forward is to integrate the new banking platform that centers around risk management with its existing corporate and credit cultures and business strategies that are largely determined by the government. SME Bank will need to balance its mission to promote the high-risk segments of SMEs with the risk management framework that is being developed. The increased operating efficiency and the ability to improve asset quality will help the bank maintain its strategic position in the event the political environment changes in the future, TRIS Rating said. --End Small and Medium Enterprise Development Bank of Thailand (SME Bank) Company Rating: Upgraded to "AA-" from "A+" Issue Rating: SME087A: Bt5,000 million senior debentures due 2008 Upgraded to "AA-" from "A+" Rating Outlook: Stable