- ASP's National Long-Term Rating affirmed at 'A-(tha)' with a Stable Outlook and National Short-Term Rating affirmed at 'F2(tha)'.
- FSS's National Long-Term Rating affirmed at 'BBB+(tha)' with a Stable Outlook and National Short-Term Rating affirmed at 'F2(tha)'.
KEY RATING DRIVERS
ASP's National Ratings reflect its strong domestic securities franchise, which the group operates through its securities arm, Asia Plus Securities (ASPS). Fitch assesses the group's overall credit profile due to the high level of operational and branding integration between ASP and its largest operating subsidiary ASPS. ASPS operates independently, without direct commercial bank partnerships, but Fitch expects the company to maintain large brokerage and investment banking market share. Its trading volume remains relatively unscathed despite the entry of new players in the last few years.
The agency expects the group's financial performance to remain sound - supported by better-than-sector average revenue diversification and brokerage commission rates. Its profitability remains stable, with an annualised ROE of 13.7% in 1H16 (1H15: 15.4%), despite a competitive brokerage business landscape. The group's leverage is also satisfactory, with an equity/asset ratio of 48.9% at end-June 2016 (end-2015: 57.1%).
FSS's National Ratings reflect its moderately strong domestic brokerage franchise, less-diversified business model and solid capital and liquidity position. FSS had a strong market share of 5.6% in 1H16 in terms of stock-market trading value, ranking third overall. However, its average trading fee has been declining due to increased online trading, for which the commission rate is significantly lower than when a trade is executed by marketing staff.
FSS's changing revenue structure and heavy competition will continue to put pressure on the company's operating performance. Nevertheless, FSS has a strong capital position, with an equity/asset ratio of 47.1% at end-June 2016, and reasonably liquid asset buffers commensurate with the risks entailed by its business model.
RATING SENSITIVITIES
A worsening of ASP's and FSS's key financial performance ratios, either from lower profitability or aggressive asset-growth, which deviate from industry trends, could put downward pressure on the companies' ratings.
A rating upgrade may be considered if ASP and FSS show improved key financial metrics through a number of industry cycles without compromising their balance-sheet strengths and risk profiles and maintaining or strengthening their franchises.