5 Thai subsidiaries of foreign banks affirmed
Credit rating agency Fitch has affirmed the National Long-Term ratings of five Thai subsidiaries of foreign- owned banks. United Overseas Bank ( Thai) Public Company Limited (UOBT), Industrial and Commercial Bank of China (Thai) Public Company Limited (ICBCT) and ICBC (Thai) Leasing Company Limited (ICBCTL) have been affirmed at 'AAA(tha)'; Maybank Kim Eng Securities (Thailand) Public Company Limited (MBKET) affirmed at 'AA(tha)' and CIMB Thai Bank Public Company Limited (CIMBT) affirmed at 'AA-(tha)'. The Outlooks are Stable, except for the rating on MBKET, which has a Negative Outlook.
Credit rating agency Fitch has also affirmed UOBT's and CIMBT's Long-Term Foreign- Currency IDR at ' A-' and ' BBB', respectively.
The National ratings of UOBT, ICBCT, MBKET, and CIMBT, as well as the IDRs and Support Ratings of UOBT and CIMBT, reflect Fitch's belief of a high probability of extraordi- nary support, if required, from their respective parent banks, United Overseas Bank Limited (UOB; AA-/Stable), Industrial and Commercial Bank of China (ICBC; A/Stable), Malayan Banking Berhad (Maybank; A-/Negative), and CIMB Bank Berhad (CIMB). Fitch considers the Thai subsidiaries to be strategically important to the parents due to the high levels of operational integration, past histories of financial support and near-full ownership.
The National ratings of ICBCTL reflect Fitch's view that it is a core subsidiary of ICBCT. ICBCTL has a key role in implementing the bank's retail strategy and its contribution to the bank is substantial. ICBCTL accounted for 38% of ICBCT's consolidated loan portfolio as of end-2013.
The Outlooks for UOBT, ICBCT, ICBCTL, and MBKET are consistent with that of their parents. The Stable Outlook for CIMBT reflects Fitch's expectation that the parent bank's ability and propensity to provide extraordinary support to CIMBT is unlikely to change over the next one to two years.
UOBT's Viability Rating (VR) of
'bb+' reflects its modest (though improving) domestic franchise, and weaker funding and profitability compared with higher- rated Thai banks. It also takes into consideration UOBT's sound risk management culture and effective system ( supported by UOB), as well as UOBT's strong capital position.
CIMBT's VR of 'bb-' is based on its limited franchise, as well as relatively weaker asset quality and capitalisation indicators compared with local and international peers. There have been some improvements in key financial measures, and Fitch expects CIMBT's overall credit profile to remain in line with similarly rated peers.
CIMBT's Thai baht-denominated subordinated Upper Tier 2 debt is currently rated two notches below CIMBT's National Long-term Rating, based on the debt's subordination and coupon deferral feature. Its subordinated unsecured debt (Lower Tier 2) is rated one notch below. The notching for these debts instruments reflects their subordination in the capital structure and is in line with Fitch's rating approach for such instruments.
Negative rating action on the IDRs on UOB, ICBC, and Maybank could lead to similar action on their subsidiaries' ratings. A material change in the parent banks' ability and/ or propensity to support their Thai subsidiaries could also have an impact on the subsidiaries' ratings. For example, a significant reduction in group shareholding in the subsidiary could result in negative rating action.
A material improvement in CIMB's credit profile may result in an upgrade of CIMBT's IDRs and National Ratings; conversely a significant deterioration may result in downgrades. Since UOBT's Long-Term ForeignCurrency IDR is constrained by Thailand's 'A-' country ceiling, any changes in the country ceiling could lead to complementary movements at UOBT's IDR. The National LongTerm Ratings for UOBT, ICBCT, and ICBCTL are already the highest on the national scale, and hence there is no upside. An upgrade of Thailand's Long-Term Local-Currency IDR, while ICBC's ratings remain unchanged, may result in a downgrade of ICBCT's and ICBCTL's National Ratings.