MOODY'S REVIEWS AND RAISES RATINGS OF FIVE MAJOR THAI BANKS
Moody's Investors Service placed under review for possible upgrade the bank financial strength ratings and senior and subordinated debt ratings of four Thai banks: Bangkok Bank, Thai Farmers Bank, Siam Commercial Bank, and Bank of Ayudhya. Moody's also raised the bank financial strength rating and the subordinated debt rating of Bank of Asia. The rating agency revised the outlook for the ratings of Thai banks from stable to positive. Moody's action reflects the enhanced stability of the Thai banking system as a result of banks' own efforts (which are continuing), and the past and likely future actions of the Thai government.
Moody's said that, although Thailand's banking system remains far from adequately capitalised, the outlook has significantly improved: the stronger banks are likely to be able to continue to access local and foreign markets over the medium term, and the ability and political willingness of the government of Thailand to provide additional resources as needed have increased. Predictability has also improved - the risk to creditors of specific regulatory action against them, hitherto a risk (in Moody's opinion) and despite the government's professed support for senior bank creditors, has receded. The intrinsic asset quality of the banks, that is, the expected losses that they will ultimately bear on their existing loan portfolio, continues in line with the rating agency's previous expectations, which incorporate very high delinquencies and, subsequently, widespread rescheduling of loan principal repayment and interest rate reductions for the foreseeable future.
Moody's said that its review will focus on the ability of the banks to increase their capital resources over the medium term, and the degree of protection this would afford them against the major risks that they face, from both internal and external sources. In particular, the degree to which the major Thai banks are exposed to adverse economic factors and local interest rate movements, and their long-term ability to preserve franchises in a much more challenging environment, will be reviewed.
Bank of Asia, Moody's noted, remains strongly supported by its 76% parent, the Dutch ABN AMRO Bank N.V. (rated by Moody's Aa2 for its long-term debt and B+ bank financial strength rating). The agency believes that the financial position of Bank of Asia will be steadily improved through management and financial support by the parent, and the consequent development of its focussed franchise. The raising of the bank's subordinated debt rating reflects the rating agency's belief that local regulatory action that might interfere with the parent's support of the subsidiary's public debt obligations is now a negligible risk.
The following ratings were placed under review for possible upgrade:
Bangkok Bank - the bank financial strength rating of E+, and the long-term debt ratings of Ba3 (senior) and B2 (subordinated).
Thai Farmers Bank - the bank financial strength rating of E+, and the long-term subordinated debt rating of B2.
Siam Commercial Bank - the bank financial strength rating of E, and the long-term debt ratings of Ba3 (senior) and B2 (subordinated).
Bank of Ayudhya - the bank financial strength rating of E, and the long-term debt ratings of B1 (senior) and B3 (subordinated).
The following ratings were raised:
Bank of Asia - the bank financial strength rating from E to D, and the long-term subordinated debt rating from Ba2 to Ba1.
The ratings of all Thai banks for their deposits, of B1 (long-term) and Not Prime (short-term) remain unchanged.
The outlook for the ratings of all Thai financial institutions, as follows, was raised from stable to positive:
Krung Thai Bank.
Thai Farmers Bank.
Siam Commercial Bank.
Bank of Ayudhya.
Thai Military Bank.
Bank of Asia.
Bangkok Metropolitan Bank.
Siam City Bank.
Specialised finance institution:
The Industrial Finance Corporation of Thailand.
Specialised government banks:
Government Housing Bank
Export-Import Bank of Thailand
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