TRIS Rating Co., Ltd. has affirmed the ratings of Kiatnakin Bank PLC (KK) and its senior debentures (KK069A, KK079A, KK073A, KK087A) at "A-" with "stable" outlook. The ratings reflect the bank's capable management team, its ability to diversify into new businesses to replace its fading distressed asset management business and its strong cushion of capital and allowances for loan loss that enables it to absorb risks from adverse changes in the banking business environment. The ratings also take into account KK's universal banking status, which will provide the company with better financial flexibility and long-term opportunities in commercial banking business. However, the ratings are constrained by KK's limited franchise value compared with other well-established commercial banks, less favorable business environment, intensifying competition in the banking industry and rising problem loans in the real estate sector.
The "stable" outlook reflects the expectation that KK will be capable to sustain its profitability in the medium term. The rating outlook also reflects KK's acceptable risk management system and sound capitalization that should protect the bank from any adverse change in the business environment. In addition, KK's new status as a universal bank is expected to enhance its financial flexibility and will increase opportunities fromthe expanded scope of the banking business.
TRIS Rating reported that KK has utilized the experience and managerial skill it gained from managing financial claims to evaluate the credit risk of small- to medium-sized residential project operators. These new real estate loans have enabled KK to generate additional income while its distressed loan management portfolio winds down within the next two years.
With KK's expertise in the automobile hire purchase business, the bank rapidly expanded its hire purchase loan portfolio in 2004 and the first nine months of 2005. As of September 2005, KK's hire purchase loans and real estate loans accounted for 50% and 41% of total outstanding loans, respectively. Less favorable economic and business factors have pressured KK's asset quality of real estate and construction loans, leading to further deterioration in loan quality. As the bank engages in high risk/high return lending, especially residential project loans, KK's management has a policy to maintain strong cushions of capital and loan loss allowances, said TRIS Rating. - End
Kiatnakin Bank PLC (KK) Company Rating: Affirmed at A- Issue Ratings: KK069A: Bt1,500 million senior debentures due 2006 Affirmed at A- KK079A: Bt1,000 million senior debentures due 2007 Affirmed at A- KK073A: Bt1,000 million senior debentures due 2007 Affirmed at A- KK087A: Bt1,000 million senior debentures due 2008 Affirmed at A- Rating Outlook: Stable