TRIS Rating Co., Ltd. has maintained the ratings of Thanachart Bank PLC (TBANK) and its bills of exchange (B/E) at “A+” and has also affirmed the rating of TBANK’s current subordinated debentures at “A”. At the same time, TRIS Rating has assigned a “A” rating to TBANK’s proposed issue of up to Bt2,000 million in subordinated debentures. The rating outlook remains “stable”. The ratings reflect TBANK’s strong business profile, supported by its management’s capability and experience in core business, hire purchase, and its enlarged networks and appropriate business platform to strengthen Thanachart Group’s business synergy. The ratings are also enhanced by TBANK’s strong credit profile of its new strategic partner, Bank of Nova Scotia (BNS), Canada, with a 48.99% stake. However, these strengths are constrained by the unfavourable economy and banking business environment, uncertainty in the securities industry, and intensifying competition in the consumer finance industry, which might limit the group’s business expansion and profitability.
The “stable” outlook recognizes TBANK’s designated role as the group’s core financial and banking operator. The outlook also takes into account the expectation that TBANK will be able to maintain its strong market position in its major business, HP lending, with controllable asset quality. Driving force for fee income growth and the group’s cost synergy are expected to help offset the rising investment in additional branch network during the expansion phase.
TRIS Rating reported that during 2005-2008, TBANK succeeded in establishing a physical branch network, ATM pools, and foreign exchange booths. Efficient utilization of its branch network has been gradually improved, resulting in further improvement in the group’s market position, business diversification and financial performance in 2008. In July 2007, Thanachart Capital PLC (TCAP), the bank’s parent company, entered into a joint venture agreement with BNS for investment in TBANK, which made changes in TBANK’s shareholder structure. As of 3 February 2009, TBANK’s shareholding stake was 50.92% held by TCAP and 48.99% held by BNS. TBANK’s business profile and financial performance have been supported by its appropriate business platform and strategic assistant from BNS.
TBANK is well equipped to succeed in the auto hire purchase business and it executed improvement in its group synergy. The strong team of hire purchase (HP) staff and an efficient operating system have enabled the bank to maintain the largest player position in the HP market. As a result of the bank’s appropriate group strategies, business and financial performance of the bank and its subsidiaries continue to improve. An increase in bundled products and cross selling strategies of the bank strengthened market position of key subsidiaries related to securities, fund management, leasing, life insurance and non-life insurance businesses.
As of December 2008, on a consolidation basis, TBANK’s total loans were Bt276,430 million, up by 21% from Bt228,986 million as of December 2007. TBANK posted strong growth in hire purchase lending by 21% to Bt203,829 million from Bt167,956 million. Of the total loans, hire purchase lending accounts for 74%, remaining stable since December 2006. This growth is in line with TBANK’s strategy to position as the market leader in auto hire purchase lending. On a consolidation basis, its four main businesses (hire purchase, insurance, securities and asset management) have enabled TBANK to fully diversify the revenue base. In December 2008, non-interest income accounted for 49% of total income, up from 43% of total income in December 2007, due mainly to the increase of revenue from insurance business.
Regarding to TBANK’s funding structure, the bank also succeeded in its funding restructuring plan. The bank has significantly expanded the size of savings deposits with more diversified retail deposits. The savings deposits are considered as a stable and cheap funding source for commercial banks. As of December 2008, the bank’s total deposits increased by 43% from 2007 and savings accounts were more than 27% of total deposits.
After recapitalization with entry of BNS in July 2007, TBANK’s capital base was stronger, as reflected by an increase in the ratio of equity to total assets from 5.9% in 2006 to 7.0% in 2007. However, the ratio reduced to 5.6% as the bank’s assets grew strongly by 25.8%. At the same time, the bank’s BIS ratio increased from 11.1% to 12.0% and declined to 11.18% in 2008 as the bank has utilized its capital for portfolio expansion. As TBANK had a good asset quality and sufficient allowance for possible loan losses, its ratio of non-performing assets (classified loans more than three months pass due, outstanding amount of troubled debt restructuring and foreclosed property) was only 0.3 times its capital fund and allowance for loan loss, which provides sufficient cushion against downside risk from adverse changes in operating environment. -- End
Company Rating: Affirmed at A+ Issue Ratings: Bt1,200 million bills of exchange due 2009 Affirmed at A+ TBANK155A: Bt5,000 million subordinated debentures due 2015 Affirmed at A Up to Bt2,000 million subordinated debentures due 2019 A Rating Outlook: Stable
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