Fitch affirms CIMB Thai Bank at 'AA-(tha)'
Fitch Ratings (Thailand) has affirmed CIMB Thai Bank Public Company Limited's (CIMBT) National LongTerm Rating and National Short-Term Rating at 'AA(tha)' and 'F1+(tha), respectively. The Outlook is Negative. At the same time, we have affirmed CIMBT's medium-term note (MTN) programme at 'AA-(tha)' and 'F1+(tha)'.
CIMBT's National Ratings are based on Fitch's view that there is a high probability that CIMBT would receive extraordinary support from its parent, Malaysia's CIMB Bank Berhad (CIMB Bank), if needed. Fitch uses its institutional-support framework to rate CIMBT, as we believe CIMBT has an important role in the group. CIMBT's presence in Thailand is in line with the group's ASEAN strategy, and there are ongoing marketing synergies with the parent.
The ratings also take into consideration CIMB Bank's 94.8% stake in CIMBT as well as management control, brand-sharing and close integration between CIMBT and the group. The Negative Outlook on CIMBT is consistent with Fitch's view on the credit profile of CIMB Bank.
The rating on the senior MTN programme is equalised with CIMBT's National LongTerm and Short-Term Ratings, as the notes under the programme represent senior and unsecured obligations of the bank.
A greater capacity or propensity of the parent bank to provide support to CIMBT could have a positive effect on the ratings of the Thai subsidiary, although any assessment would also have to take into account CIMBT's credit profile relative to Thai national rating peers.
Our Outlook on CIMBT could be revised to Stable from Negative should our assessment of the parent's credit profile improve. There could also be positive rating action if CIMBT plays a significantly more important role within the group.
This could come about from a sustained and material increase in CIMBT's contribution to the parent bank and the group, such as a contribution above 20% in terms of asset size and profit, combined with an assessment that the group views Thailand as a core and integral market. CIMBT's contributions to CIMB Bank have been averaging approximately 10% and 7% during 20172020 in terms of assets and pre-tax profit, respectively.
Fitch would downgrade CIMBT's National Long-Term Rating if the standalone credit profile of its parent were to deteriorate. There could also be rating downside if the parent's propensity to provide extraordinary support were to decline. For example, this could happen if the parent were to reduce its shareholding to below 75%, or if there were weakening linkages in terms of integration and name or branding association, or a sign of a declining commitment to provide financial and operational support to the Thai subsidiary. Any negative rating action would also take into account relativities on the Thai national rating scale.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The ratings on the programme are sensitive to changes in CIMBT's National Long and Short-Term Ratings. An upgrade of CIMBT's National Long-Term Rating would lead to an upgrade of the MTN programme. The National Short-Term Rating on the MTN programme is the highest rating on the national rating scale, and hence there is no upside.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Downgrades of CIMBT's National Long- and ShortTerm Ratings would affect the rating on the MTN programme. However, a downgrade of CIMBT's National Short-Term Rating would only occur if its National LongTerm Rating were to be downgraded by multiple notches to below 'A(tha)'.