TRIS Rating Co., Ltd. has affirmed the company rating of Siam Commercial Leasing PCL (SCBL, formerly known as Siam Panich Leasing PLC (SPL)) and the ratings of SCBL’s senior debentures at “A+”. At the same time, TRIS Rating has also affirmed the ratings of SCBL’s guaranteed debentures at “AA” as a consequence of the guarantee received from its parent, Siam Commercial Bank PCL (SCB). The outlooks remain “stable”.
SCBL’s company and senior debenture ratings are based on the continued business and financial support received from SCB. The ratings are enhanced from the standalone rating of SCBL to reflect the strategic importance of SCBL to SCB’s auto loan business. Although SCBL’s core business policy changed in early 2008, the ratings are supported by sufficient cash inflows from monthly loan installments retained by SCBL to service its own debt obligations. In addition, the ratings are based on the assumption that there will be no capital reduction or unusual dividend payment which would erode SCBL’s strong capital base as the loan portfolio is winding down. However, these strengths are partially offset by an unfavourable economic environment, which might constrain the company’s asset quality and losses on repossession. SCBL’s guaranteed debenture ratings reflect the credit profile of SCB as the 99.12% shareholder of SCBL and the guarantor for SCBL’s debentures. SCB’s credit profile is supported by its strong market position as the third largest commercial bank in Thailand with a strong operating branch network nationwide, improving financial and business performance, its sound and experienced management team, and strong cushion of capital fund and allowance for doubtful accounts against bad debts. SCB’s credit profile, however, is partly constrained by less favorable operating environment, uncertain securities industry, intensifying competition in consumer and retail finance industry, which might limit the bank’s overall growth prospects and profitability.
The “stable” outlook for SCBL’s company and senior debenture ratings reflect the status of SCBL as SCB’s strategic entity and strong business and financial support from SCB. The outlook takes into consideration that SCBL will maintain a strong capital base during the portfolio wind down. In addition, any changes in the relation of SCBL to SCB, including ownership and support, could affect SCBL’s ratings. While the “stable” outlook for SCBL’s guaranteed debenture ratings reflect the likelihood that SCB will deliver a medium-term financial performance as expected, and will be able to keep its leading market position in its core businesses and to control its asset quality efficiently as planned. The bank’s good risk management system, proven track record and strong capital fund will help mitigate future downside risks from less favourable operating environment.
TRIS Rating reported that SCB is the third largest among all 12 Thai universal banks and has a strong franchise value. With a century of experience in the banking industry, SCB has developed a proficient management team and universal banking platform that has enabled the bank to compete in this very competitive industry. SCB’s centralization of the management and control system has been settled to benefit the overall group’s business control and cost efficiency, while decentralization of its business unit functions through its branch and subsidiary network nationwide has enhanced the group’s market position in its core businesses. The bank’s good risk management system, experienced management team and strong cushion of capital fund and allowance for doubtful accounts against bad debts should mitigate future downside risks.
TRIS Rating said, as SCBL’s business policy changed, new retail auto loans have been placed on the books of SCB since the second quarter of 2008 and SCBL has acted as the auto loan servicer for 60-day-plus delinquent accounts, both for SCB and its existing accounts. As a result, SCBL’s outstanding loans decreased continuously from a peak of Bt81,298 million at the end of March 2008 to Bt60,439 million in 2008 and Bt53,355 million at the end of March 2009. Financial support from SCB has been fully utilized and arranged to match with the portfolio duration. Of the total of Bt43,639 million in borrowings at the end of March 2009, 82.6% were borrowings from SCB and the remaining 9.6% and 7.8% were public debentures and borrowings from other financial institutions, respectively. The shrinkage of its loan portfolio has strengthened SCBL’s capital base. The ratio of shareholders’ equity to total assets improved from 12.1% at the end of March 2008 to 18.8% at the end of March 2009.
SCBL’s non-performing loans (NPL) surged to 5.9% of adjusted average loans in the third quarter 2008, up from 2.5% at the end of 2007, partly due to the business transition in that period. Though the ratio improved to 4.2% at the end of 2008, TRIS Rating is concerned that a prolonged economic slowdown might depress SCBL’s profitability from a deteriorating asset quality. At the end of March 2009, the NPL ratio deteriorated to 4.9%, partly due to the smaller portfolio. However, the parent bank’s efficient risk management system is expected to mitigate any downside risk and be able to control SCBL’s asset quality to generate enough cash flow to service the remaining debt obligations. In addition, maintaining a strong capital base as the portfolio is winding down provides an additional cushion against probable asset quality deterioration, in event there is not a significant capital reduction and/or unusual dividend payment, said TRIS Rating. -- End
Company Rating: Affirmed at A+ Issue Ratings: SPL102A: Bt900 million guaranteed debentures due 2010 Affirmed at AA SPL109A: Bt300 million guaranteed debentures due 2010 Affirmed at AA SPL106A: Bt3,000 million senior debentures due 2010 Affirmed at A+ Rating Outlook: Stable
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