TRIS Rating Co., Ltd. has affirmed the rating of Kiatnakin Bank PLC (KK) and the ratings
of KK’s current senior debentures at “A-”. At the same time, TRIS Rating has also assigned a
“A-” rating to KK’s proposed up to Bt5,000 million senior debentures. The outlook remains “stable”.
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 it 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 has enhanced its financial flexibility
and increased opportunities from the expanded scope of the banking business.
TRIS Rating reported that KK has moved to lending business since 2003 to replace its distressed
loan management business, which will gradually wind down within the next two years. The bank
had focused on real estate loans and hire purchase loans, which the bank has experience and managerial
skill gained from distressed asset management. As of December 2005, KK’s hire purchase loans and
real estate loans accounted for 51% and 38% of total outstanding loans, respectively. These loans
have enabled KK to generate steady income and to sustain high yields. However, 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.
The bank’s ratio of classified loans (sub-standard, doubtful and doubtful loss) for hire
purchase and real estate loans to total loans of each business increased to 4.8% and 28.6%,
respectively, as of December 2005 from 3.8% and 21.3% as of December 2004. As KK engages in high
risk/high return lending, especially residential project loans, its management has a policy to
maintain strong cushions of capital and loan loss allowances. As of December 2005, KK’s
non-performing assets (non-performing loans, troubled debt restructuring and property foreclosed)
was 0.71 times of its capital fund and allowance for loan loss, which was lower than average
of 1.32 times for all 14 Thai banks (including three new granted banks: ACL Bank PLC,
TISCO Bank PLC and KK). -- 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: Bt935 million senior debentures due 2007 Affirmed at A-
KK087A: Bt3,000 million senior debentures due 2008 Affirmed at A-
Up to Bt5,000 million senior debentures due 2011 A-
Rating Outlook: Stable
of KK’s current senior debentures at “A-”. At the same time, TRIS Rating has also assigned a
“A-” rating to KK’s proposed up to Bt5,000 million senior debentures. The outlook remains “stable”.
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 it 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 has enhanced its financial flexibility
and increased opportunities from the expanded scope of the banking business.
TRIS Rating reported that KK has moved to lending business since 2003 to replace its distressed
loan management business, which will gradually wind down within the next two years. The bank
had focused on real estate loans and hire purchase loans, which the bank has experience and managerial
skill gained from distressed asset management. As of December 2005, KK’s hire purchase loans and
real estate loans accounted for 51% and 38% of total outstanding loans, respectively. These loans
have enabled KK to generate steady income and to sustain high yields. However, 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.
The bank’s ratio of classified loans (sub-standard, doubtful and doubtful loss) for hire
purchase and real estate loans to total loans of each business increased to 4.8% and 28.6%,
respectively, as of December 2005 from 3.8% and 21.3% as of December 2004. As KK engages in high
risk/high return lending, especially residential project loans, its management has a policy to
maintain strong cushions of capital and loan loss allowances. As of December 2005, KK’s
non-performing assets (non-performing loans, troubled debt restructuring and property foreclosed)
was 0.71 times of its capital fund and allowance for loan loss, which was lower than average
of 1.32 times for all 14 Thai banks (including three new granted banks: ACL Bank PLC,
TISCO Bank PLC and KK). -- 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: Bt935 million senior debentures due 2007 Affirmed at A-
KK087A: Bt3,000 million senior debentures due 2008 Affirmed at A-
Up to Bt5,000 million senior debentures due 2011 A-
Rating Outlook: Stable