Fitch Upgrades 3 Thai Banks' IDRs on Sovereign Action; Affirms KTB

Stocks and Financial Services Press Releases Monday March 11, 2013 13:33
Bangkok--11 Mar--Fitch Ratings

Fitch Ratings has upgraded three Thai banks, Export-Import Bank of Thailand's (EXIM), Standard Chartered Bank (Thai) Public Company Limited's (SCBT) and United Overseas Bank (Thai) Public Company Limited's (UOBT)) Long-term Foreign Currency IDRs (LTFC IDRs). At the same time, Fitch has also affirmed Krung Thai Bank Public Company Limited's (KTB) IDR. A full list of rating actions is included at the end of this commentary. Rating Action Rationale

The rating actions follow the upgrade of Thailand's LTFC IDR to 'BBB+' from 'BBB', Short-Term FC IDR to 'F2' from 'F3' and Country Ceiling to 'A-' from 'BBB+'on 8 March 2013. (see related rating action commentary at www.fitchratings.com).

EXIM's FC IDRs and Support Rating Floor are equalised with those of Thailand's ratings, which reflect Fitch's view of a high probability of support from the state, if needed. This is based on the Ministry of Finance's full ownership and supervision, the bank's entitlement to loss compensation and certain debt guarantee provision from the state, its legal status as a specialised financial institution (SFI) and its important policy role as Thailand's principal export credit agency.

The upgrades of SCBT's and UOBT's LTFC IDRs to 'A-' from 'BBB+' follow the upgrade of Thailand's Country Ceiling, as these two foreign-owned banks' LTFC IDRs are capped at the Country Ceiling. The banks' foreign parents are rated higher than the Country Ceiling. SCBT and UOBT are considered by Fitch to be strategically important subsidiaries to their respective parents, and thus would be expected to receive timely support from their parents, if required.

The affirmation of KTB's ratings reflects Fitch's view that KTB is considered less of a policy institution than EXIM as it is a primarily a commercial financial institution. As such, the bank's ratings have started to de-couple from those of the sovereign as the latter moves up the credit scale. This is observed in many higher-rated jurisdictions, where the tendency of systemically important financial institutions (including those with partial policy functions and which are less than 100%-state-owned) to support government policies is usually lower. However, its IDRs still remain support-driven based on the government's majority ownership and close control of, and strong historical support for the bank, as well as the bank's systemic importance to the Thai financial system and economy.

Rating Drivers and Sensitivities - IDR and Support Rating Floor

A change in Thailand's FC IDRs would thus result in the same movement of EXIM's Support Rating Floor and FC IDRs. However, adverse changes to Fitch's view of the willingness or ability of the Thai government to support EXIM, including a material reduction in ownership, could lead to a negative change in the bank's ratings.

Any change in shareholding structure of SCBT's or UOBT's parents, in its propensity to support or in the parents' ratings could impact their ratings. As their LTFC IDRs are capped by the Country Ceiling, a change in Thailand's Country Ceiling could also affect their ratings.

A further change in Thailand's ratings could affect KTB's IDRs and Support Rating Floor since KTB's ratings reflect Fitch's expectation of a high probability of support from the government, if needed.
The list of ratings actions are as follows:
EXIM:
  • Long-Term Foreign Currency IDR upgraded to 'BBB+' from 'BBB'; Outlook Stable
  • Short-Term Foreign Currency IDR upgraded to 'F2' from 'F3'
  • Support Rating affirmed at '2'
  • Support Rating Floor revised to 'BBB+' from 'BBB'
  • Long-Term National Rating affirmed at 'AAA(tha)'; Outlook Stable
  • Short-Term National Rating affirmed at 'F1+(tha)'
SCBT:
  • Long-Term Foreign Currency IDR upgraded to 'A-' from 'BBB+'; Outlook Stable
  • Short-Term Foreign Currency IDR affirmed at 'F2'
  • Long-Term Local Currency IDR affirmed at 'A+'; Outlook Stable
  • Short-Term Local Currency IDR affirmed at 'F1'
  • Support Rating upgraded to '1' from '2'
  • National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
  • National Short-Term Rating affirmed at 'F1+(tha)'
UOBT:
  • Long-Term Foreign Currency IDR upgraded to 'A-' from 'BBB+'; Outlook Stable
  • Short-Term Foreign Currency IDR affirmed at 'F2'
  • Support Rating upgraded to '1' from '2'
  • National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
  • National Short-term Rating affirmed at 'F1+(tha)'
KTB: