TRIS Rating Co., Ltd. has affirmed the company rating of TMB Bank PLC (TMB) at “A+” and has also affirmed the ratings of TMB’s existing subordinated debentures and hybrid Tier-1 securities at “A” and “BBB+”, respectively. At the same time, TRIS Rating has assigned a rating of “A” to TMB’s proposed issue of up to Bt8,000 million in subordinated debentures. The rating outlook remains “stable”. The company and subordinated debentures ratings reflect TMB’s capable management team and ongoing support from its major shareholders. As a strategic partner, ING Bank N.V. actively manages TMB and has been strengthening TMB’s financial and business profiles. TMB has leveraged ING Bank’s know-how in risk management and strengths in retail banking, insurance and asset management services, which are the keys to future growth. TMB also has strong cushion of capital funds and allowance for doubtful accounts to absorb unexpected losses from future downside risks associated with adverse changes in the operating environment. However, these strengths are pressured by high legacy non-performing assets (NPA), relatively weak profitability, and uncertainty in domestic political and global financial situations, which might limit the bank’s business growth and profitability.
The “BBB+” rating for TMB’s Bt4,000 million in hybrid Tier-1 securities reflects both the subordination and payment deferral risks of the issue. The hybrid Tier-1 securities are perpetual, noncumulative, subordinated, unsecured, and callable by the bank after five years and every six months thereafter. The holders of hybrid Teir-1 securities will be subordinated to depositors and holders of senior debts and subordinated debts of the bank. The bank will not be obliged to make any payment in the event that the bank expects no net profit for the same six-month period during which any interest payment would be due or payable. Such non-payment will not constitute a default by the bank.
The “stable” outlook reflects the expectation of further improvement in TMB’s asset quality, financial profile and operating efficiency in the medium term. Support from ING Bank is expected to continuously enhance TMB’s risk management system and practices, franchise value, and competitive edge, and to generate steady earnings in the medium term.
TRIS Rating reported that TMB’s major shareholders are ING Bank (including ING Support Holding) and the Ministry of Finance (MOF), which held 30.1% and 26.1% of the shares as of December 2009, respectively. All the key management personnel were on board in March 2009. The management team is well-recognized in the banking industry. All have extensive experience at the senior management level from large-sized commercial banks. TMB succeeded in laying the foundation during 2008-2009, and has been implementing the 2nd phase of the customer centric transformation (2010-2011), focusing on differentiation and quality growth. The priorities for 2010 and 2011 include service and operational excellence, product expansion, and channel and branch enhancement. The bank’s execution to improve both business and financial performance according to the business plan has yet to be monitored. The management team continues to face challenges to enhance operating efficiency, improve asset quality, and grow the base of profitable assets and stable funding amid uncertainty in changes of banking operating environments in the future.
TRIS Rating said, as of December 2009, TMB was the sixth largest commercial bank in Thailand in terms of assets, with 6% market share in loans and 7% share in deposits. Total consolidated assets were Bt543,653 million, down by 9.6% from Bt601,985 million in 2008. TMB reported net profit of Bt2,044 million in 2009, up from Bt424 million in 2008. In 2009, TMB had Bt3,256 million in extraordinary gains on buying back perpetual non-cumulative Tier-1 securities and on unwinding of interest swap contracts, and the bank utilized the gains to set aside additional general provisions. The profitability was mainly pressured by the decrease in average interest spread to 2.05% in 2009 from 2.34% in 2008, as well as additional expenses for staff realignment program and losses on impairment of properties foreclosed and other assets.
To resolve the problem of legacy non-performing loans (NPL) and NPA, TMB sold approximately Bt15,000 million NPL and Bt4,300 million NPA to Bangkok Commercial Asset Management Co., Ltd. (BAM) in May 2009. The NPA ratio, therefore, markedly decreased to 12.75% at the end of 2009 from 16.24% in 2008, while the NPL ratio declined to 12.42% in 2009 from 13.95% in 2008. These levels are far above the industry average of 6.9% for the 12 universal banks. However, the bank had strong cushion of capital fund and allowance for doubtful accounts against bad debts. As of December 2009, total NPA (classified loans with more than three months overdue, plus the outstanding amount of troubled debt restructurings and foreclosed property) was 0.8 times its capital fund and allowance for doubtful accounts (down from 0.9 times in 2008), which was in line with the industry average. In 2010, the bank plans to further sell approximately Bt8,000 million of both NPL and NPA, and expand high quality loan portfolio, in order to reduce the NPL ratio to a single digit figure.
On the liabilities side, TMB succeeded to restructure the funding base to be more diversified into cheap and stable funding sources. Current and savings deposits accounted for 50% of total deposits in 2009, up from 39% in 2008, which moved on track and in line with the average level of six large-sized commercial banks. TMB had a strong capital fund to support business expansion and absorb unexpected losses from risks associated with adverse changes in operating environment in the medium term. The ratio of shareholders’ equity to total assets improved from 7.48% in 2008 to 8.69% in 2009. The BIS ratio also increased from 16.81% to 17.03%. The issuance of the Bt4,000 million hybrid Tier-1 securities in April 2009 strengthened both TMB’s Tier-1 and Tier-2 capital. The proceeds from the proposed subordinated debentures of up to Bt8,000 million will be replaced the existing subordinated debentures of Bt4,905 million (TMB153A), and will be partly enhanced the bank’s tier-2 capital fund, said TRIS Rating. -- End
Note: TMB owns 15.30% of TRIS Rating’s parent company, TRIS Corporation Ltd. (TRIS), which holds a 99.99% stake in TRIS Rating. TMB Bank PLC (TMB) Company Rating: Affirmed at A+ Issue Ratings: TMB153A: Bt4,905 million subordinated debentures due 2015 Affirmed at A TMB19NA: Bt5,300 million subordinated debentures due 2019 Affirmed at A Up to Bt8,000 million subordinated debentures due 2020 A TMB09PA: Bt4,000 million hybrid Tier-1 securities due 2109 Affirmed at BBB+ Rating Outlook: Stable Copyright 2010, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.