KEY RATING DRIVERS
KTBST's National Ratings are based on its standalone financial profile and reflect its small domestic franchise, with less than 1.5% market share in 1Q18, and weak financials compared with other Fitch-rated Thai securities peers. The ratings are supported by a new management team that has turned around the company's successive net losses prior to 2016. Nonetheless, Fitch expects KTBST's improving performance to remain more volatile than that of domestic rated peers over the medium-term due to its weaker franchise, as reflected in its less diversified and developing business model, and higher costs.
KTBST has weaker capitalisation than domestic peers, but its planned 2019 stock market listing and improving performance could strengthen its capital position at the current rating. KTBST is more exposed to funding and liquidity risk due to its unproven funding stability and limited history of capital market access. The company plans to reduce its reliance on short-term funding and broaden its funding sources by issuing subordinated debentures.
RATING SENSITIVITIES
Fitch believes near-term rating upside is limited. The current ratings reflect KTBST's improving trend in its financials and a significant and sustained improvement in its scale, domestic franchise and financial profile is unlikely to be achieved in the short term. Better revenue diversification and key financial ratios should strengthen its current rating level.
A reversal of the improving financial trends, such as a significant weakening in capitalisation, profitability or liquidity, which deviates from Fitch's expectations and industry trends could put downward pressure on the ratings.