TISCO’s company rating is one notch lower than the company rating of its core bank subsidiary, TISCOB. The one notch difference reflects the structural subordination of TISCO’s obligations to those of TISCOB, TISCO’s dependence on dividends from TISCOB, and the regulatory barriers surrounding the payment of the dividends.
The “stable” outlook reflects the expectation that TISCO will sustain its strong competitive position in auto hire-purchase lending, and maintain an adequate level of capital funds. The outlook is also based on the assumption that TISCO’s loan quality will not deteriorate further.
The credit profile of TISCO could be negatively impacted if any further shrinkage in TISCO's loan portfolio causes its profitability to decline significantly, or if a substantial drop in the quality of its loan portfolio causes its credit cost to rise significantly. In contrast, any credit upside is unlikely in the near term due to the limited prospects for the hire-purchase segment and the weak economy.
In 2008, TISCO was set up as a holding company and the parent company of a group of affiliated companies, in place of TISCOB. TISCO’s largest shareholder is CDIB & Partners Investment Holding Pte. Ltd., with a 10% stake as of December 2014. The remaining shares belong to local and foreign investors. At the end of 2014, TISCO was ranked ninth among all 17 Thai commercial banks based on consolidated asset size, with a 2.5% market share in loans and a 1.9% share in deposits. TISCO has maintained its strong market position in auto hire-purchase lending. TISCO was the fourth-largest of 16 auto loan providers in TRIS Rating’s database, with approximately 12% market share at the end of 2013. TISCO’s major revenue source is TISCOB, which contributes the largest portion (over 80% of total interest income plus fee-based income). The remaining portion of TISCO’s revenue is contributed by other subsidiaries and affiliates like TISCO Securities Co., Ltd. (TSC), TISCO Asset Management Co., Ltd. (TISCOASSET), and Hi-Way Co., Ltd. (Hi-Way).
TISCO’s loan portfolio comprises retail loans (69% of total loans), followed by corporate loans (20%), small and medium-sized enterprises or SME loans (9%), and other loans (2%) as of December 2014. TISCO’s loan portfolio grew steadily at a compound annual growth rate of 23% over 2009-2013. Hire-purchase lending jumped during 2012 and 2013, largely as a result of an economic stimulus package implemented by the previous government. TISCO’s loan portfolio, however, contracted in 2014 because of a slowing economy and sluggish auto sales. At the end of 2014, TISCO’s loans and receivables amounted to Bt263.4 billion, down by 8% year-on-year (y-o-y).
TISCO’s loan quality has deteriorated recently because of unfavorable economic conditions. New non-performing loans (NPLs) increased sharply during 2013 and 2014. The ratio of NPLs to total loans rose to 2.56% in 2014, from 1.25% in 2012. However, TISCO maintains large amounts of surplus reserves for loan losses that help mitigate potential credit losses in the future.
In 2014, TISCO’s net income was Bt4.3 billion, down slightly by 1% from the prior year. Its credit cost increased by 7% y-o-y. TISCO’s profitability has fallen during the past four years. Return on average assets (ROAA) has continually declined, falling to 1.3% in 2014, from 1.9% in 2010. The interest spread fell from 4.3% in 2010 to 2.5% in 2014. Nonetheless, TISCO’s operating cost controls help mitigate some of the negative effects from the high cost of funds.
TISCO’s capital position strengthened recently. The company’s capital funds are adequate to fund its loan growth plans over the next few years. The capital buffer is likely sufficient to absorb unexpected losses from future downside risks. On a consolidated basis as of December 2014, TISCO reported a Tier 1ratio and a total capital ratio (BIS ratio) of 11.4% and 15.4%, respectively, above the minimum requirements set by the Bank of Thailand (BOT).
TISCO Financial Group PLC (TISCO)
Company Rating: A-
Rating Outlook: Stable