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Rating Action:

Moody's upgrades Standard Chartered Bank (Thai) to Baa1; outlook stable

25 Nov 2019

Singapore, November 25, 2019 -- Moody's Investors Service ("Moody's") has upgraded Standard Chartered Bank (Thai) Public Co Ltd's (SCBT) long-term issuer and deposit ratings to Baa1 from Baa2 with stable outlook.

Concurrently, Moody's has also upgraded the bank's long-term counterparty risk rating and counterparty risk assessment by one notch to A3 and A3(cr) from Baa1 and Baa1(cr) respectively, and its baseline credit assessment (BCA) and adjusted BCA by one notch to baa3 from ba1, and baa1 from baa2. Short-term deposit and issuer ratings of P-2, counterparty risk rating of P-2, and counterpart risk assessment of P-2(cr) are affirmed.

RATINGS RATIONALE

SCBT's credit ratings were upgraded on the back of its BCA upgrade, which improved thanks to the bank's very high core capital ratio, highly liquid balance sheet, and improved asset quality.

The bank continues to maintain a low-risk financial profile following its reorganization in 2017 when it sold its retail banking operations.

SCBT has a very high capital buffer, with a 25% tangible common equity to risk-weighted assets ratio as of 30 June 2019. While its capital ratio has been decreasing since 2017 due repatriation of excess capital following the sale of retail operations, Moody's expects that SCBT will keep a strong capital level during 2020 and 2021.

The bank is exposed to low credit risk with no new non-performing loans (NPL) since its de-risking and restructuring in 2017. Its loan book formed only a modest 25% of total assets, with net NPLs at zero as of 30 June 2019. Its gross NPL ratio, while elevated at 6%, is composed of fully provisioned legacy exposures.

The bank's loan book is concentrated on single-parties, however most of the exposures are short-term and of good quality according to its internal ratings.

Outside of loans, other assets remain high quality and liquid. These assets comprise of large holdings of Thailand sovereign bonds and interbank assets including those due from the parent group, which has resulted in a high liquidity coverage ratio of 216% for the second quarter of 2019.

Moody's has incorporated a very high affiliate support probability from Standard Chartered PLC (A2 stable, baa1), SCBT's ultimate owner, in its ratings on SCBT, which has resulted in a two-notch uplift for SCBT's Baa1 issuer and deposit ratings and baa1 adjusted BCA. Moody's expects public support to be low and therefore excludes it from SCBT's ratings.

While governance is highly relevant for the banking industry, Moody's does not have any particular governance concern for SCBT and does not apply any corporate behavior adjustment to the bank's BCA.

WHAT COULD MOVE THE RATINGS UP/DOWN

Moody's could upgrade SCBT's issuer and deposit ratings if three conditions are met: (1) baa3 BCA of SCBT is upgraded, (2) baa1 BCA of Standard Chartered PLC is upgraded, and (3) Baa1 rating of the government of Thailand is upgraded.

A downgrade of Standard Chartered PLC's BCA would exert pressure on SCBT's Adjusted BCA and long-term ratings. A lowering of Moody's assumption of support from Standard Chartered PLC would also lead to a downgrade of the bank's ratings.

Moody's could upgrade SCBT's deposit ratings if its BCA is downgraded because of a deterioration in its financial fundamentals. If all other rating factors are constant, the BCA would come under adverse pressure if the bank reports a significantly increased non-performing loans ratio or significantly reduced profitability.

The principal methodology used in these ratings was Banks published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Standard Chartered Bank (Thai) Public Co Ltd (SCBT), headquartered in Bangkok, reported total assets of THB138 billion ($4.5 billion) as of 30 September 2019.

REGULATORY DISCLOSURES

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 ratings tab on the issuer/entity page for the respective issuer on www.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.

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

Please see www.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 ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Eugene Tarzimanov
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
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.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
© 2021 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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