Tisco Bank's credit profile largely intact

The bank’s holding company, Tisco Financial Group, will cut its operating expenditure by 30 per cent this quarter to lessen the impact on its profit in the period, said an analyst.

Tisco Bank is a 99.99-per-cent-owned subsidiary of Tisco Financial Group. Tisco was ranked ninth among 17 Thai commercial banks, in terms of asset size, as of June, with a 2.3-per-cent market share in loans and a 1.7-per-cent share in deposits. At the end of 2014, the bank was the fourth-largest of 16 auto-loan providers in Tris Rating’s database, with about 11 per cent of the market.

Tris Rating currently assigns Tisco Bank an "A" rating for the company and for its senior unsecured debentures, a rating of "A-" for its subordinated debentures, and a rating of "BBB+" for its hybrid Tier 2 capital security, with a "stable" outlook.

Tris believes although the increased loan-loss provisions for SSI will reduce Tisco Bank’s profits for 2015 below the rating firm’s expectation, the drop in profits will occur only this year. Therefore, the additional provisions for the large non-performing loans (NPLs) at SSI Group are unlikely to have a material effect on Tisco’s capital position. The bank’s regulatory capital base is adequate to fund its expansion efforts over the next few years.

In addition, the bank’s base of capital funds and its competitive position in auto instalment loans remain strong. Its loan quality is still better than the industry average, despite some recent deterioration.

Tisco Bank recently reclassified the debts of SSI Group, which is a large debtor of TISCOB, as NPLs. As a result, the bank has set additional provisions for doubtful debts worth about Bt1.5 billion in the current third quarter.

Tisco lent SSI Group about Bt4.4 billion, or 1.8 per cent of the bank’s total loans as of June. In accordance with SSI Group’s restructuring plan, SSI UK recently announced the temporary shutdown of its large steel plant in Britain so as to restructure its operations and financial position.

SSI Group, comprising Sahaviriya Steel Industries (SSI) and its subsidiary Sahaviriya Steel Industries UK (SSI UK), has borrowed around Bt50 billion from three Thai commercial banks, including Tisco.

Tisco Financial Group on Wednesday held a meeting with analysts, who were told that the group would reduce operating expenditures this quarter by 30 per cent from the second quarter and seek more fee income to carry on its profit in the third quarter.

Tisco Financial Group executives told analysts that the group had no plan to set extra provisions to increase its coverage ratio to above 100 per cent even though the provisions for SSI loans will pull down its coverage ratio to 74 per cent. The coverage ratio of 70-80 per cent is sufficient, the executives said.