KEY RATING DRIVERS
The Basel III Tier 2 notes are rated one notch below the anchor rating to reflect their higher loss-severity risk relative to senior unsecured instruments arising from their subordinated status. Key terms of the notes include a non-viability trigger (defined as emergency capital assistance from the central bank or any other empowered government agency), with a partial rather than mandatory full write-down feature. The Tier 2 notes are more senior than any Additional Tier 1 securities with loss-absorption features. In the event of a write-down, the Tier 2 notes would be written down on a pari passu basis with all other Tier 2 loss-absorbing instruments with write-down features of the issuer.
TMB’s National Long-Term Rating (A+(tha)/Stable) is used as the anchor rating and it is based on the company’s stand-alone financial strength. The bank’s credit profile is viewed as the best indicator of non-performance risk. No additional notching has been applied as there are no going-concern loss-absorption features.
The bank’s overall financial performance – particularly its asset quality - has improved in recent years, although its profitability remains the lowest among Thailand’s mid-sized banks. However, capitalisation and liquidity are sound and compare well with its peers’.
RATING SENSITIVITIES
Any changes in TMB’s stand-alone credit profile and in its National Long-Term Rating would have an impact on the rating of these notes.
A material reversal of recent gains in key financial measures such as asset quality and earnings could lead to a downgrade. So too could a material increase in risk appetite if not offset by strengthened buffers in terms of capital and profitability. An upgrade is unlikely in the near term because Fitch expects further improvement in TMB's overall credit profile to be gradual and this has been factored into the ratings.
The other ratings of TMB are unaffected and are as follows:
- Long-Term IDR: 'BBB-'; Outlook Stable
- Short-Term IDR: 'F3'
- USD3.0bn senior unsecured medium-term note programme: ‘BBB-’
- Viability Rating: 'bbb-'
- Support Rating: '3'
- Support Rating Floor: 'BB+'
- National Long-Term Rating: 'A+(tha)'; Outlook Stable
- National Short-Term Rating: 'F1(tha)';
- National subordinated debt rating: 'A(tha)'