TRIS Rating Co., Ltd. has announced an upgrade to the company rating of Ayudhya Capital Auto Lease PLC (AYCAL), formerly known as GE Capital Auto Lease PLC (GECAL), to “A+” from “A”, following the rating upgrade of its parent company, Bank of Ayudhya PLC (BAY), to “AA-/Stable” from “A+/Positive”. The rating outlook of AYCAL is “stable”. The company rating is enhanced by AYCAL’s standalone rating, as the company is a core strategic subsidiary of BAY in the automobile hire purchase business, and helps fulfill its parent company’s universal banking services. AYCAL’s standalone rating is based on the company’s strong market position in the automobile and motorcycle hire purchase business, experienced management team with a proven track record and its good risk management system. However, these strengths are partially offset by intense competition in automobile and motorcycle hire purchase businesses and an unfavourable operating environment, which may adversely impact AYCAL’s business expansion, financial performance and asset quality in the future.
The “stable” outlook reflects the expectation that AYCAL’s business direction will closely align with BAY Group’s business strategy, and the company continues to get strong support from BAY. The outlook also considers the ability of the management team to sustain strong market position in the auto and motorcycle hire purchase businesses. With experienced management, good risk management system and strong support from BAY, TRIS Rating expects the company would be able to maintain assets in good quality and improve the financial performance in the medium term.
TRIS Rating reported that AYCAL was formerly a wholly-owned subsidiary of GE Capital Asia Investment Inc (GECAI). The company became BAY’s wholly-owned subsidiary in February 2008, following BAY’s business reorganization, after GE Capital International Holdings Corporation (GECIH) purchased a 32.93% stake in BAY. AYCAL’s total receivables accounted for 18% of BAY’s consolidated loan outstanding. Net income of AYCAL for 2008 contributed 32% to BAY’s consolidated net income. Business and financial supports from BAY are expected to enhance AYCAL’s market position in its core businesses and improve its financial flexibility. AYCAL has applied the risk management model from its parent company’s practice. Both AYCAL and BAY, therefore, are regulated under the same standard criteria set by the Bank of Thailand.
AYCAL is the second largest among 20 auto hire purchase operators in TRIS Rating’s database, with Bt95,269 million of outstanding loans or 13% market share in 2008. Also, the company is the second largest motorcycle hire purchase operator, having outstanding loans of Bt3,582 million in 2008. With 16 years of experience in the industry, AYCAL has developed a proficient management team and business platform that has enabled the company to compete successfully. As part of the reorganization of BAY in late 2008, AYCAL became a sole subsidiary for BAY’s auto loan business, providing hire purchase financing for the purchase of new cars, used cars, and motorcycles. AYCAL also renders secured personal loans services through auto sales and lease back, under the brand Car4Cash. After the auto loan business restructuring, the net outstanding loan portfolio (net unearned interest) in 2008 increased by 23% from Bt79,846 million at the end of 2007 to Bt98,566 million at the end of 2008. Net interest income for 2008 was Bt5,731 million, lower than the Bt6,076 million reported in 2007. This drop follows the trend of declining hire purchase rates. Profitability slightly declined in 2008. Return on average assets and return on average equity decreased to 1.74% and 15.33%, respectively in 2008, from 2.27% and 22.03% in 2007.
TRIS Rating said that the good credit risk management and an efficient collection system helped AYCAL keep good asset quality, despite its high risk portfolio. As of December 2008, non-performing loans, defined as delinquent loans with more than three months overdue, accounted for 2.22% of average loans, up from 1.99% in 2007. This figure is considered low when compared to peers in auto and motorcycle hire purchase industry. The shareholders’ equity to total asset ratio declined to 10.90% at the end of 2008 from 11.95% in 2007, as the consolidation of hire purchase loan portfolio from BAY’s subsidiaries. The level of capital at AYCAL is lower than other hire purchase operators in the high risk market segments. However, TRIS Rating expects the level of capital to rise gradually from internal growth of operating income in the future. — End
Company Rating: Upgraded to A+ from A Rating Outlook: Stable
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