The rating actions are driven by Fitch's reassessment of shareholder support. SCBT's direct parent has been changed from UK-based Standard Chartered Bank (SCB, A+/Negative/a), to Standard Chartered Bank (Singapore) Limited (SCBS; A+/Stable/a) upon the completion of the group's ASEAN hub based in Singapore. Fitch views that SCBT's strong integration with the SCB group remains unchanged, but any required extraordinary support would initially stem from SCBS. Thus the Outlook on SCBT's ratings was revised to be in line with the Outlook on SCBS.
Rating Withdrawals
Fitch is withdrawing SCBT's Support Rating as it is no longer relevant to the agency's coverage following the publication of our updated Bank Rating Criteria on 12 November 2021. In line with the updated criteria, we have assigned SCBT a Shareholder Support Rating (SSR) of 'a-'.
Key Rating Drivers
SCBT's SSR and IDRs are driven by our assessment of shareholder support. The affirmation of SCBT's IDRs reflect a high probability of support from its new direct parent, SCBS, if needed. This is based on its near-full (99.9%) ownership of the Thai subsidiary, SCBT's role in supporting the group's regional business, close operational integration, and the high reputational damage that would occur if the Thai subsidiary were to default on its financial obligations.
SCBT's SSR and Long-term IDRs are notched down once from the parent's Viability Rating as it is in a strategically important yet non-core market for the group. Furthermore, SCBT is not defined as a material entity in group resolution and there remains uncertainty as to whether SCBT will benefit from the group's qualifying junior-debt buffer.
Key Rating Driver 1
SCBT's National Ratings are also driven by our assessment of shareholder support, and reflect the bank's credit profile relative to other issuers on the Thai national rating scale. The agency believes SCBT's support-driven profile is in line with the strongest credits in the country, as SCBT's Long-Term Local-Currency IDR is higher than Thailand's sovereign rating of 'BBB+'.
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Any decline in SCBS's ability to support SCBT, as indicated by its Viability Rating, may lead to a downgrade in the subsidiary's SSR and, in turn, its Long-Term Foreign- and Local-Currency IDRs.
A decline in the propensity of SCBS to support SCBT may also be negative for the subsidiary's SSR and Long-Term IDRs. This may be indicated by SCBT's weakening role in supporting SCB group business and a reduction in integration, such as by a decrease in the parent's stake in SCBT to below 75%, combined with a decrease in the level of management control and business linkages. However, Fitch does not expect this to occur in the near term.
A downgrade of Thailand's Country Ceiling of 'A-' would lead to a downgrade of SCBT's SSR and Long-Term Foreign-Currency IDR.
SCBT's National Long-Term Rating may be downgraded if its Long-Term Local-Currency IDR is downgraded below Thailand's sovereign rating of 'BBB+', though this would also be contingent on Fitch's assessment of SCBT's relative strengths on the Thai national rating scale.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An increased ability or propensity of the parent to provide support to SCBT could lead to an upgrade of SCBT's Long-Term Local-Currency IDR. There is no upside to the SSR or Long-Term Foreign-Currency IDR unless Thailand's Country Ceiling of 'A-' is upgraded.
The Short-Term Local-Currency IDR could be upgraded if SCBT's Long-Term Local-Currency IDR is upgraded, but the Short-Term Foreign-Currency IDR is unlikely to be upgraded given the Long-Term Foreign-Currency IDR is capped at Thailand's Country Ceiling.
There is no upside to the National Ratings, which are at the top end of the scale.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
SCBT's ratings are linked to SCBS's Viability Rating.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
Additional information is available on www.fitchratings.com
Source: Fitch Ratings