Moody"s reviews 11 banks in Thailand for possible downgrade

2009-05-27 03:57:09.116 GMT

Singapore Singapore

Karolyn C. Seet Beatrice Woo

Asst Vice President - Analyst VP - Senior Credit Officer

Financial Institutions Group Financial Institutions Group

Moody"s Singapore Pte Ltd. Moody"s Singapore Pte Ltd.

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Moody"s reviews 11 banks in Thailand for possible downgrade

Singapore, May 27, 2009 -- Moody"s Investors Service has placed the debt

and deposit ratings of 11 banks in Thailand on review for possible

downgrade.

The banks affected are Bangkok Bank (BBL), Bank of Ayudhya (BAY),

Export-Import Bank of Thailand (EXIMT), Government Housing Bank (GHB),

Kasikornbank (KBank), Krung Thai Bank (KTB), Siam City Bank (SCIB), Siam

Commercial Bank (SCB), Standard Chartered Bank Thailand (SCBT), TMB Bank

(TMB) and United Overseas Bank Thailand (UOBT).

"The review of their debt and deposit ratings will look at the extent to

which Thailand"s ability to provide support to its banking system, if

needed, is converging with the government"s own debt capacity as a result

of the ongoing global economic and credit crisis," says Karolyn Seet, a

Moody"s Assistant Vice President and Analyst.

"Moody"s believes that most governments are at least as likely, if not

more likely, to support their banking systems as they are to service

their own debt -- a view that has traditionally led to bank ratings often

benefiting from significant uplift due to systemic support," says Seet.

"However, as the financial crisis continues, the capacity of a country

and its central bank to support its banks converges with, and is

increasingly constrained by, the government"s own debt capacity," says

Seet. In this respect, please see Moody"s recent report "Financial Crisis

More Closely Aligns Bank Credit Risk and Government Ratings in Non-Aaa

Countries" available on www.moodys.com.

"As such, Moody"s will be reassessing the level of systemic support for

the banks listed above to determine whether the systemic support they

receive needs to be more closely aligned to the government"s local

currency bond rating," says Seet.

Moody"s will review the specific circumstances of Thailand to determine

the appropriate systemic support for Thailand"s bank ratings and the

implications for the 11 banks that have been identified as being

potentially affected.

Factors that Moody"s will consider in its assessment of systemic support

include the size of the banking system in relation to government

resources, the level of stress in the banking system, the foreign

currency obligations of the banking systems relative to the government"s

own foreign exchange resources, and changes to the government"s

political patterns and priorities.

Moody"s assesses Thailand to be a high support country. This guideline

takes into consideration the history of support for banks, the size,

strength and the degree of fragmentation of the Thai banking system.

Thai banking assets equal around 90% of GDP. Thailand"s government debt,

low relative to the country"s GDP, is underpinned by the hardiness of the

domestic banking and financial system, allowing the government a high

degree of flexibility in extending support to the banking system through

liquidity and capital assistance, as exemplified in the past. The banking

system does not rely substantially on the supply of foreign currency to

fund its operations.

The credit stress evident in the Thai banking system is low relative to

other Asian countries, following the worldwide economic recession and

domestic political unrest. Banking system NPLs have remained rather

resilient to the global downturn and have shown signs of only a gradual

increase to date (approximately 0.5% on average). Thai banking system

loans have experienced tepid growth in the past 10 years, and are

expected to continue to grow during the course of 2009.

The rating review has been prompted by the severity and longevity of the

global economic crisis and the country"s political turmoil -- as

reflected by Moody"s negative credit outlook on the Thai banking system.

Over the next two years, banks are likely to experience higher

credit-related write-downs, lower growth and lower revenue, which in

turn may pressure the banks" current capitalization levels.

With regard to political and historical patterns, necessary procedures

and policy instruments to deal with banking system problems have been

established and tested since the 1997 Asian Financial Crisis. In Moody"s

view, in case of need, support is likely to be provided for the system"s

banks. The support framework for problematic banks will likely aim to

maintain ordinary banking functions and to avoid the liquidation of any

bank.

Moody"s notes that the review is unlikely to lead to more than a one-notch

change in the debt and deposit ratings of the institutions under review.

It expects to conclude the review over the next few weeks.

All other bank ratings in Thailand are not impacted by the reassessment

of the systemic support level.

PREVIOUS RATING ACTION AND PRINCIPAL METHODOLOGIES

The last rating actions for BBL, EXIMT, GHB, KBank, KTB, SCB, SCBT and

UOBT, were on December 5, 2008, when the outlook of their foreign

currency debt and deposit ratings was revised to negative from stable;

The last rating action for BAY was on April 10, 2008 when the BFSR was

upgraded to D from D-;

The last rating action for KTB was on December 8, 2008, when the outlook

on its D- BFSR, A3/Prime-1 local currency deposit ratings and the Baa3

rating for its preferred stock were changed to negative from stable;

The last rating action for SCIB was on May 4, 2007, when its BFSR was

affirmed at D. Its long-term foreign currency deposit rating was changed

to Baa2 from Baa3 and short-term foreign currency deposit rating was left

unchanged at P-3. Its foreign currency debt rating for senior unsecured

MTN was changed to Baa2 from Baa3. Its foreign currency debt rating for

subordinate MTN obligations was changed to Baa3 from Ba1;

The last rating action for TMB was on June 20, 2007, when its B1 Hybrid

Tier 1 securities was affirmed.

The principal methodologies used in rating these banks were "Bank

Financial Strength Ratings: Global Methodology" (February 2007) and

"Incorporation of Joint-Default Analysis into Moody"s Bank Ratings: A

Refined Methodology" (March 2007). The principal methodology used in

rating EXIMT -- a government-related issuer and a government-controlled

financial company with specific policy mandates - is "The Application of

Joint-Default Analysis to Government Related Issuers". These documents

can be found at www.moodys.com in the Credit Policy & Methodologies

directory, in the Ratings Methodologies subdirectory. Other methodologies

and factors that may have been considered in the process of rating this

issuer can also be found in the Credit Policy & Methodologies directory.

The following ratings were placed on review for downgrade:

(i) BBL: the foreign currency long-term deposit rating of Baa1 with a

negative outlook; the foreign currency short-term deposit rating of P-2

with a stable outlook; the foreign currency subordinated debt rating of

Baa2 with a stable outlook;

(ii) BAY: the foreign currency long-term deposit rating of Baa2; the

foreign currency senior unsecured debt rating of Baa2; the foreign

currency short-term deposit rating of P-2; all with a stable outlook;

(iii) EXIMT: The foreign currency issuer rating of A3 with a negative

outlook;

(iv) GHB: the foreign currency long-term deposit rating of Baa1 with a

negative outlook and the foreign currency short-term deposit rating of

P-2 with a stable outlook;

(v) KBank: the foreign currency long-term deposit rating of Baa1 with a

negative outlook; the foreign currency short-term deposit rating of P-2

with a stable outlook; the local currency deposit ratings of A3/P-1 with

stable outlooks; the foreign currency subordinated debt rating of Baa1

with a negative outlook;

(vi) KTB: the foreign currency long-term deposit rating of Baa1 with a

negative outlook; the foreign currency short-term deposit rating of P-2

with a stable outlook; the local currency deposit ratings of A3/P-1 with

negative outlooks; the foreign currency certificate of deposit program

rating of Baa1 and the foreign currency preferred stock rating of Baa3

with negative outlooks;

(vii) SCIB: the foreign currency long-term deposit rating of Baa2, the

foreign currency senior unsecured debt ratings of Baa2/P-3; the foreign

currency subordinated debt rating of Baa3; the foreign currency

short-term deposit rating of P-3; all with stable outlooks;

(viii) SCB: the foreign currency long-term deposit rating of Baa1 with a

negative outlook; the foreign currency short-term deposit rating of P-2

with a stable outlook; the local currency deposit ratings of A3/P-1 with

stable outlooks;

(ix) SCBT: the foreign currency long-term deposit rating of Baa1 with a

negative outlook; the foreign currency short-term deposit rating of P-2

with a stable outlook; the foreign currency issuer ratings of A3/P-2; the

local currency issuer ratings of A3/P-1; the local currency deposit

ratings of A3/P-1 with stable outlooks;

(x) TMB: the foreign currency long-term deposit rating of Baa2; the

foreign currency short-term deposit rating of P-2; the foreign currency

preferred stock rating of B1; all with stable outlooks;

(xi) UOBT: the foreign currency long term deposit rating of Baa1 with a

negative outlook; the foreign currency short-term deposit rating of P-2

with a stable outlook.

BBL, headquartered in Bangkok, had total assets of Bt1,677 billion as of

end-2008.

BAY, headquartered in Bangkok, had total assets of Bt745 billion as of

end-2008.

EXIMT, headquartered in Bangkok, had total assets of Bt60 billion as of

end-2008.

GHB, headquartered in Bangkok, had total assets of Bt664 billion as of

end-2008.

KBank, headquartered in Bangkok, had total assets of Bt1,303 billion as

of end-2008.

KTB, headquartered in Bangkok, had total assets of Bt1,330 billion as of

end-2008.

SCIB, headquartered in Bangkok, had total assets of Bt420 billion as of

end-2008.

SCB, headquartered in Bangkok, had total assets of Bt1,241 billion as of

end-2008.

SCBT, headquartered in Bangkok, had total assets of Bt290 billion as of

end-2008.

TMB, headquartered in Bangkok, had total assets of Bt602 billion as of

end-2008.

UOBT, headquartered in Bangkok, had total assets of Bt217 billion as of

end-2008.

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