A full rating breakdown is provided below.
The transaction has reduced GECIH’s stake in BAY to 25%, which is about the same level with the Ratanarak Group, another major shareholder. According to BAY, there is no change in executive management and board members as a result of this transaction. GECIH has said it will continue to review strategic options for its remaining interest in BAY. Any further divestment by GECIH or the Ratanarak Group leading to the entry of a new major shareholder may cause Fitch to review BAY's ratings.
GECIH’s investment in BAY since 2007 has been positive for the bank’s standalone credit profile by way of capital injection and operational support, which Fitch views as ordinary support under BAY’s five-year partnership with GECIH. Supported by GECIH’s experience in consumer finance, BAY has built up its retail lending franchise via organic growth and several strategic acquisitions (including GE Capital Auto Lease, AIG Retail Bank, AIG Card, GE Money Thailand and HSBC's Thailand retail banking business) over the past four years. The bank aims to increase its retail exposure to about 50% of its total portfolio from the current 48%.
Positive rating action may result from significant improvement in BAY’s deposit franchise that is comparable to its major domestic peers, in terms of retail deposits as a share of total funding. Maintaining its strong capital position and sustainable profitability may also benefit the ratings. Any sharp increase in liquidity risk, including heavier reliance on wholesale funding, risk of significant deterioration in asset quality due to aggressive asset growth, or material weakening of capital position may lead to negative rating action.
BAY was established in 1945 and is Thailand’s fifth-largest commercial bank by consolidated assets with around 8% share each in loans and deposits at end-June 2012. Its key subsidiaries are involved in auto finance, credit cards, consumer finance, securities and fund management. Given BAY’s share of deposits and loans, there is a moderate probability of government support, in case of need.
BAY’s current ratings:
- Long-Term Issuer Default Rating: 'BBB'; Outlook Stable
- Short-Term Issuer Default Rating: 'F3'
- Viability Rating: 'bbb'
- Support Rating: '3'
- Support Rating Floor: 'BB+'
- National Long-Term Rating: 'AA-(tha)'; Outlook Stable
- National Short-Term Rating: 'F1+(tha)'
- National Long-term unsubordinated unsecured debt: 'AA-(tha)'
- National Long-term subordinated debt: 'A+(tha)'
- National Short-term unsubordinated unsecured debenture programme: 'F1+(tha)'
Contact:
Ambreesh Srivastava
Senior Director
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Fitch Ratings Singapore PTE Ltd
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Piyamas Chaihetphon
Associate Director
+662 655 4749
Fitch Ratings (Thailand) Limited
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Bangkok 10330