A full list of rating actions is below.
Fitch is withdrawing the Viability Rating (VR) of SCBT as it is no longer considered relevant to our coverage. Fitch believes that SCBT is becoming increasingly integrated with the business of its direct parent, Standard Chartered Bank (Singapore) Limited (SCBS, A+/Stable/a).
SCBT's business model focusing on the group's corporate and institutional clients also means that its franchise is increasingly difficult to differentiate from that of SCBS as the two become more entwined, and hence it would not be meaningful to assess SCBT's credit profile on a standalone basis. The withdrawal of the VR does not affect our view on SCBT's IDRs, which are underpinned by the bank's SSR.
KEY RATING DRIVERS
Parental Support: SCBT's IDRs and National Ratings are driven by the SSR, which reflects Fitch's belief that there is a very high probability SCBS would provide extraordinary support to the Thai subsidiary, if needed.
SCBT's National Rating reflects the bank's credit profile relative to other issuers on our Thai national rating scale. Fitch believe 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+'.
Strong Synergies, Strategic Significance: SCBT's SSR reflects the bank's strong synergies with SCBS and its strategic importance to the parent. SCBT is 99.9% owned by SCBS, with full management control and common branding. Furthermore, SCBT has a key role in supporting the group's corporate banking business in the Greater Mekong region, and there is close operational integration with the parent. Fitch believes that because of these clear linkages any default of the Thai subsidiary would constitute high reputational risk to SCBS.
Limited Group Role, Regulatory Restrictions: SCBT's SSR is notched down once from the parent's VR, as it is in a non-core market location and it has a more limited role in the group compared to larger subsidiaries. Furthermore, there are local regulatory restrictions that prevent full capital fungibility with the parent. We use SCBS's VR of 'a' instead of its Long-Term IDR as the anchor rating for shareholder support, given the uncertainty over whether SCBT would benefit from a significant buffer of qualifying junior debt
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Any decline in the ability of SCBS (as indicated by negative rating action on its VR) to support SCBT may lead to a downgrade in the subsidiary's SSR, and hence the Long-Term IDRs.
A decline in the propensity of SCBS to support SCBT may also be negative for the subsidiary's SSR and Long-Term IDRs. For example, this may be indicated by a decline in shareholding to below 75%, combined with a decrease in the level of management control and business linkages. However, Fitch does not expect any changes in support propensity to occur in the medium term.
A downgrade of Thailand's (BBB+/Stable) Country Ceiling of 'A-' will lead to a downgrade of SCBT's SSR and Long-Term Foreign-Currency IDR, but would not affect SCBT's Long-Term Local-Currency IDR.
SCBT's National Long-Term Rating may be downgraded if its Long-Term Local-Currency IDR is downgraded, although this would also depend on Fitch's assessment of SCBT's credit profile compared with peers on our Thai national rating scale.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An increase in the ability or propensity of the parent group to provide support to SCBT could lead to an upgrade of SCBT's Long-Term Local-Currency IDR. The Short-Term Local-Currency IDR could be upgraded if SCBT's Long-Term Local-Currency IDR is upgraded.
There is no upside to the Long-Term Foreign-Currency IDR and the SSR, which are at Thailand's Country Ceiling of 'A-'.
There is no upside to the National Ratings, which are at the top end of their scales.
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 VR.
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