Fitch affirms ratings for Thai policy banks
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FITCH RATINGS has affirmed the ratings for six policy banks in Thailand.
The institutions are the Bank for Agriculture and Agricultural Cooperatives (BAAC), the Export-Import Bank of Thailand (Exim Bank), the Government Housing Bank (GH Bank), the Government Savings Bank (GSB), the Islamic Bank of Thailand (IBank) and the SME Development Bank of Thailand (SME Bank).
At the same time, the company has withdrawn the support ratings for BAAC, GH Bank and GSB as these are no longer considered relevant to the coverage.
All ratings are based on Fitch’s expectation of a high probability of extraordinary support from the government towards these important policy banks.
The banks have strong state linkages, and were set up under specific legislation to fulfil key public-policy initiatives. There are also clear precedents of state support for these banks, such as financial compensation for government policy initiatives, or capital injections in the event it is required, said the ratings company.
The Finance Ministry has full ownership of Exim Bank, GSB and GH Bank, and near-full ownership of BAAC and SME Bank.
The ministry’s direct shareholding in IBank is capped at 49 per cent, but shareholdings from other state-owned banks mean that the government controls more than 98 per cent of the bank’s shares.
The long-term issuer default ratings (IDRs) of Exim and SME banks are at the same level as the sovereign.
The national ratings of BAAC, Exim, GH Bank and SME Bank are at the highest possible level.
IBank’s long-term IDR and national ratings are two notches below the sovereign, reflecting the lower direct Finance Ministry shareholding, and less explicit state support in its establishment act compared to the other policy banks.
Although Fitch expects timely support to be provided to the banks, if needed, the performances and financial profile of BAAC, Exim Bank, GH Bank and GSB are such that support has not been required.
SME Bank and IBank have faced some challenges in performance and delinquencies, but Fitch views the weaker performance at these two entities as unlikely to affect the government’s propensity to support.
In fact, additional capital injections are planned for both banks in coming months, it said.
The international ratings assigned to Exim Bank, IBank and SME Bank would be similarly influenced by any changes in Thailand’s sovereign rating. The national ratings assigned to these banks would, however, not be affected, as the sovereign would still have the lowest default risk in the country.
Any reduction in the sovereign rating’s propensity to support any of the banks could lead to a downgrade on both the international and national scales, Fitch said.
For example, a material reduction in the state shareholding, or a change in legal status, could be indicative of reduced state support and lead to a downgrade. However, the company views this as unlikely in the short to medium term.
The rating actions are as follows:
BAAC
National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable
National Short-Term Rating affirmed at ‘F1+(tha)’
Support Rating affirmed at 2 and withdrawn
EXIM:
Long-term IDR affirmed at ‘BBB+’; Outlook Stable
Short-term IDR affirmed at ‘F2’
Support Rating affirmed at 2
Support Rating Floor affirmed at ‘BBB+’
National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable
National Short-Term Rating affirmed at ‘F1+(tha)’
GH BANK
National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable
National Short-Term Rating affirmed at ‘F1+(tha)’
Support Rating affirmed at 2 and withdrawn
GSB:
Support Rating affirmed at 2 and withdrawn
IBANK:
Long-term IDR affirmed at ‘BBB-’; Outlook Stable
Short-term IDR affirmed at ‘F3’
Support Rating affirmed at 2
Support Rating Floor affirmed at ‘BBB-’
National Long-Term Rating affirmed at ‘AA(tha)’; Outlook Stable
National Short-Term Rating affirmed at ‘F1+(tha)’
SME BANK:
Long-term IDR affirmed at ‘BBB+’; Outlook Stable
Short-term IDR affirmed at ‘F2’
Support Rating affirmed at 2
Support Rating Floor affirmed at ‘BBB+’
National Long-Term Rating affirmed at ‘AAA(tha)’; Outlook Stable
National Short-Term Rating affirmed at ‘F1+(tha)’
