Moody's assigns 'Baa1' to KTB's US$ senior notes
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Krungthai Bank (KTB) will become the first local bank to raise funds overseas this year with a US$2.5 billion (Bt75 billion) euro medium note programme, after a massive mobilisation last year.
Last year, Thai banks raised more than $3 billion abroad through unsecured notes, which are counted as Tier 2 capital, including more than $1 billion each by Bangkok Bank and Siam Commercial Bank. Tisco Bank in September also won shareholders’ approval for a $2-billion scheme.
KTB will draw down the funds through its Cayman Islands branch. The issue is assigned “Baa1” by Moody’s Investors Service and “BBB” by Standard & Poor’s Ratings Services.
Against its peers, KTB is praised by Moody’s for its continuous improvement in asset quality and better coverage of non-performing loans. The bank also reported higher capital levels, where the government through the Financial Institutions Development Fund participated according to its 55-per-cent shareholding.
However, it shows weaknesses in higher credit-risk concentration, lower profitability ratios and weaker capital and liquidity buffers to absorb downside-risk scenarios compared with peers rated at the same or slightly higher levels.
Last year, KTB reported an increase of 28 per cent in pre-provision income to Bt46.6 billion. The improvement was mainly due to increases in net interest and non-interest incomes.
Net interest income was driven by increases in loan volume and the average lending rate, while non-interest income rose mostly on improved fee income and corporate cross-selling fees.
The bank set aside loan loss reserves of Bt9 billion in the fourth quarter of 2012, in addition
to the normal provisions of Bt1.5 billion per quarter. Total loan loss provisions for the whole year were 12 per cent higher at Bt15.2 billion. After provisioning, the bank reported a 38-per-cent increase in net profit to Bt23.5 billion for the full year.
