Tris warns of negative outlook for three sectors

Raithiwa Naruemol, executive vice president for the firm’s credit rating group, said auto lending was likely to face a "negative" outlook for another year. Although this sector is expected to do better in 2016, the recovery will be limited because the prices of used cars are not expected to increase and asset-quality deterioration has been closely monitored, she said.

Profitability of auto lenders has been under continuous pressure from high credit costs and losses due to vehicle repossessions.

Previously, Tris adjusted the outlooks for Kiatnakin Bank and Tisco Bank to "stable" from "positive". Both banks have an "A-" rating.

Even though the auto-loan segment will face limited growth, Tris Rating has not changed its "neutral" outlook for banking because the sector has diverse balance sheets and a stable average return on average earning assets.

Over the past several years, the banking sector has expanded fee-based income from securities, asset-management and insurance businesses.

For the residential-property sector next year, Tris has assigned a "negative" outlook because of the slow economy, high household debt and high supply in the real-estate market.

The high level of household debt has resulted in a high mortgage-rejection rate, causing the inventories of residential property to increase.

Raithiwa said the low presales in 2014 to 2015 would result in low recognised sales in 2016 and 2017. In the first half of this year, total sales by 19 property developers rated by the company rose by 16 per cent from a large backlog carried forward from 2014.

Property developers are witnessing a reduction of operating margins due to higher selling and administration expenses when releasing their inventories. The value of property inventories of the rated 19 developers as of the end of June rose to Bt430 billion from Bt405 billion at the end of last year, and those inventories are expected to need three years for release.

Furthermore, the average debt-to-equity ratio of the 19 developers increased to 1.22 times as of the end of June from 1.04 times in 2013.

In agribusiness, the sugar and shrimp industries are assigned "negative" outlooks by Tris Rating. Falling prices may squeeze the profitability and cash flows of sugar companies in 2016. Meanwhile, the shrimp industry is facing investigation by the European Union for illegal, unregulated fishing, higher tariffs for exports to the EU, and low prices resulting from more production in many exporting countries.

In the view of Tris Rating, gross domestic product should be able to recover slightly to growth of 2.5-3 per cent if the government can implement its spending on mega-projects, because the large scale of investment will help private consumption and consumer confidence.

The government’s stimulus packages have little impact on domestic consumption growth if consumer purchasing power is low and prices of agricultural products drop further, said Nopalak Rakthum, senior executive vice president of Tris Rating.

Watana Tiranuchit, president of Tris, said the firm rated 163 companies, of which 39 are financial institutions and 28 are property companies. Around 80 per cent of the 163 companies have had their outlooks affirmed.