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Rating Action:

Moody's affirms deposit ratings of Bangkok Bank, Kasikornbank and Siam Commercial Bank, issuer ratings of SCB X; downgrades BCAs of Kasikornbank and Siam Commercial Bank

07 Nov 2022

Singapore, November 07, 2022 -- Moody's Investors Service has affirmed the Baa1 long-term deposit and (P)Baa1 long-term senior unsecured medium-term note (MTN) program ratings of Bangkok Bank Public Company Limited (BBL), KASIKORNBANK Public Company Limited (KBank) and Siam Commercial Bank Public Company Limited (SCB), as well as the Baa2 long-term issuer ratings of SCB X Public Company Limited (SCB X), the holding company of SCB.

The rating affirmations reflect the banks' strong capitalization and liquidity, good profitability, as well as Moody's expectation of support from the Government of Thailand (Baa1 stable) for the banks in times of need.

Moody's has also downgraded the Baseline Credit Assessments (BCAs) of KBank and SCB to baa2 from baa1, reflecting the structural challenges to their asset quality and profitability that are exacerbated by the slow economic recovery in Thailand. Moody's has also downgraded KBank's foreign-currency subordinate MTN program rating to (P)Ba1 from (P)Baa3 and its foreign-currency preferred stock non-cumulative MTN program rating to (P)Ba2 from (P)Ba1.

The rating outlooks for BBL, KBank, SCB and SCB X, where applicable, are stable.

Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL471095 for the list of affected credit ratings. This list is an integral part of this press release and identifies each affected issuer.

RATINGS RATIONALE

The rating actions reflect Moody's expectation that the uncertain global economic conditions, coupled with structural domestic challenges, will create headwinds for the recovery of Thai banks.

The affirmation of BBL's Baa1 deposit ratings and baa1 BCA reflects the bank's robust and above-average loan-loss coverage, which will mitigate asset-quality risks due to the economic and structural challenges in Thailand. In addition, BBL's asset quality will be less vulnerable to domestic economic conditions when compared with the other Thai banks because of its focus on corporate banking and strong progress in overseas expansion.

Moody's also expects BBL's profitability and capitalization to improve gradually over the next 12-18 months, supported by growing contribution from its more profitable subsidiary Bank Permata Tbk (P.T.) (Baa2 stable, ba1) and the rising interest-rate environment.

The affirmation of KBank's and SCB's Baa1 deposit ratings reflects one notch of government support uplift from the banks' baa2 BCAs. Moody's assumes that the probability of government support will be very high in times of need, taking into consideration the large market shares of these banks and their designations as domestic systemically important banks by the local central bank.

The downgrade of KBank's and SCB's BCA to baa2 from baa1 reflects Moody's expectation that their asset risks will stay elevated in 2023 because of vulnerabilities in the form of restructured loans and the retail and small and medium enterprise (SME) segments, which remain hampered by high debt leverage and eroded cash buffers.

Moody's also expects the profitability of KBank and SCB to remain below pre-pandemic levels in 2023 because of elevated credit costs, weak consumer banking growth, as well as modest expansion of their net interest margins.

The affirmation of SCB X's Baa2 ratings incorporates the fundamental credit strength of SCB and one notch of support uplift based on Moody's assumption of a moderate probability of government support. The assumption takes into consideration SCB X's strong linkages to SCB, which is systemically important to Thailand's financial system.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's is unlikely to upgrade the deposit ratings of BBL, KBank and SCB because they are already at the same level as Thailand's sovereign rating. Similarly, an upgrade of BBL's BCA is unlikely because it is also at the same level as the sovereign rating. However, Moody's could upgrade the BCAs of KBank and SCB over the next 12-18 months if the banks' restructured loans and credit costs decline substantially.

Moody's could downgrade BBL's deposit ratings if the bank's BCA is downgraded by more than one notch. Moody's could downgrade BBL's BCA over the next 12-18 months if the bank's profitability and capitalization do not improve, or if its loan-loss coverage ratio declines substantially. Moody's could also downgrade the BCAs and deposit ratings of KBank and SCB if their problem loan ratios rise above 5% and lead to a material deterioration in their profitability and capitalization.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://ratings.moodys.com/api/rmc-documents/71997. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Headquartered in Bangkok, Bangkok Bank Public Company Limited, KASIKORNBANK Public Company Limited and SCB X Public Company Limited reported total assets of THB4.4 trillion, THB4.2 trillion and THB3.4 trillion respectively, as of 30 September 2022.

REGULATORY DISCLOSURES

The List of Affected Credit Ratings announced here are all solicited credit ratings. For additional information, please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com. Additionally, the List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings.  Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL471095 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

• Rating Solicitation

• Issuer Participation

• Participation: Access to Management

• Participation: Access to Internal Documents

• Endorsement

• Lead Analyst

• Releasing Office

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.

The below contact information is provided for information purposes only. For disclosures on the lead rating analyst and the Moody's legal entity that issued the rating, please see the issuer/deal page on https://ratings.moodys.com for each of the ratings covered.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Tengfu Li
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
71 Robinson Road #05-01/02
Singapore, 068895
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
71 Robinson Road #05-01/02
Singapore, 068895
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
© 2023 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service, Inc. and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Charter Documents - Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

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