Fitch upgrades or affirms IDRs of four banks, PTT

At the same time, Fitch has affirmed Krungthai Bank’s IDR. 

It has also upgraded PTT’s LTFC IDR to “BBB+” from “BBB” and its short-term foreign-currency IDR to “F2” from “F3”. The outlook is stable. At the same time, the agency has affirmed PTT’s long-term local-currency IDR at “A-”, national long-term rating at “AAA(tha)”, and national short-term rating at “F1+(tha)”. The outlook is also stable. The national long-term rating on its senior unsecured debentures has been affirmed at “AAA(tha)”. 

The rating actions on banks follow the upgrade of Thailand’s LTFC IDR to “BBB+” from “BBB”, short-term FC IDR to “F2” from “F3” and country ceiling to “A-” from “BBB+” last Friday. The upgrade of PTT’s FC IDRs follows the upgrade of Thailand’s LTFC IDRs, also on March 8.

Exim Bank’s FC IDRs and support rating floor are equalised with those of Thailand’s ratings, which reflect Fitch’s view of a high probability of support from the state, if needed. This is based on the Ministry of Finance’s full ownership and supervision, the bank’s entitlement to loss compensation and certain debt guarantee provision from the state, its legal status as a specialised financial institution (SFI) and its important policy role as Thailand’s principal export credit agency.

The upgrades of SCBT’s and UOBT’s LTFC IDRs to “A-” from “BBB+” follow the upgrade of Thailand’s country ceiling, as these two foreign-owned banks’ LTFC IDRs are capped at the country ceiling. The banks’ foreign parents are rated higher than the country ceiling. SCBT and UOBT are considered by Fitch to be strategically important subsidiaries to their respective parents, and thus would be expected to receive timely support from their parents, if required.

The affirmation of KTB’s ratings reflects Fitch’s view that this bank is considered less of a policy institution than Exim as it is primarily a commercial financial institution. As such, the bank’s ratings have started to de-couple from those of the sovereign as the latter moves up the credit scale. 

 

Support-driven

This is observed in many higher-rated jurisdictions, where the tendency of systemically important financial institutions (including those with partial policy functions and which are less than 100 per cent state-owned) to support government policies is usually lower. However, its IDRs still remain support-driven based on the government’s majority ownership and close control of, and strong historical support for the bank, as well as the bank’s systemic importance to the Thai financial system and economy.

A change in Thailand’s FC IDRs would thus result in the same movement of Exim Bank’s support rating floor and FC IDRs, Fitch said. However, adverse changes to Fitch’s view of the willingness or ability of the Thai government to support Exim Bank, including a material reduction in ownership, could lead to a negative change in the bank’s ratings. 

Any change in shareholding structure of SCBT’s or UOBT’s parents, in its propensity to support or in the parents’ ratings could affect their ratings. As their LTFC IDRs are capped by the country ceiling, a change in Thailand’s country ceiling could also affect their ratings. A further change in Thailand’s ratings could affect KTB’s IDRs and support rating floor, since the bank’s ratings reflect Fitch’s expectation of a high probability of support from the government, if needed.