"The heightened operating risks from the prolonged political turmoil in Thailand and still weak economic environment, could impact profitability, loan growth and asset quality in the medium term. However, strong capital and liquidity should help at least the stronger banks to maintain overall performance in 2010," said Vincent Milton, Managing Director of Fitch Ratings (Thailand) and a Senior Director of Financial Institutions at the agency.
"The three bellwether banks, Bangkok Bank Public Company Limited (BBL, 'BBB+'/Stable), Siam Commercial Banks Public Company Limited (SCB, 'BBB+'/Stable) and Kasikornbank Public Company Limited (KBANK, 'BBB+'/Stable) continue to outperform the sector with Bank of Ayudhya Public Company Limited (BAY, 'BBB'/Stable) also emerging as a strong performer. TMB Bank Public Company Limited (TMB, 'BBB-'/Negative) still lags, although its performance has stabilized and should improve in 2010," Mr. Milton noted.
The report entitled "Thai Banks: 2009 and Q110 Review and Outlook -- Resilient, But Risks to Outlook Remain" states that although Thailand's economic outlook for 2010 appears to be improving, overall conditions are likely to remain weak. In addition, asset-quality pressures, particularly related to the tourism, retail trade and consumer sectors, have increased due to the disruption to these businesses from the recent civil unrest. Fitch expects a further increase in special-mention loans (SMLs), which have risen sharply since 2008. In light of these stresses, Thai banks' non-performing loans (NPLs) could rise in 2010. Nevertheless, Thai banks' average Tier 1 and total capital of about 12% and 16%, respectively, should provide a strong buffer. While growth could be affected in Q210, Fitch still expects Thailand's economic growth to recover modestly in 2010, with a full-year GDP growth forecast of 3.8%.
While Thai banks reported a significant improvement in performance in Q110, Fitch expects this to weaken in Q210 when they release their results in July. The combined net profit of the largest seven Thai banks -- BBL, Krung Thai Bank Public Company Limited (KTB, 'BBB'/Stable), SCB, KBANK, BAY, TMB, and Siam City Bank Public Company Limited (SCIB, 'BB'/RWP) -- increased sharply in Q110 to THB24.1bn (up 26.5% year on year), due mainly to lower funding costs and stronger gains on investment and fee incomes. Net interest margins (NIM) and return on assets (ROA) remained stable at 3.5% and 1.2% in Q110 (2009: 3.4% and 1.1%). Their asset quality appeared stable at end-March 2010, with total NPLs at THB352.1bn or 6.5% of total loans, although NPLs could rise in the latter half of 2010 if conditions remain weak.
Disclosure: Kasikorn Asset Management Company Limited (of which KBANK holds a 100% stake) owns 10% of the shares in Fitch Ratings (Thailand) Limited. Muang Thai Life Assurance Company Limited (of which KBANK holds a 38.3% economic interest) owns 10% of the shares in Fitch Ratings (Thailand) Limited. TISCO Asset Management Company Limited (of which TISCO Financial Group Public Company Limited holds 100%) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operations of, or credit rating reviews undertaken by Fitch Ratings (Thailand) Limited.
Applicable criteria available on Fitch's website at www.fitchratings.com: "Global Financial Institutions Rating Criteria" dated December 29, 2009; and "National Ratings - Methodology Update" dated December 18, 2006.
Contacts: Patchara Sarayudh, Narumol Charnchanavivat, Vincent Milton, Bangkok, +662 655 4755
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected]; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: [email protected].
Additional information is available at www.fitchratings.com.
Related Research:
Global Financial Institutions Rating Criteria
National Ratings - Methodology Update