- United Overseas Bank (Thai) Public Company Limited's (UOBT) Long-Term Foreign-Currency Issuer Default Rating (IDR) affirmed at 'A-' and National Long-Term Rating affirmed at 'AAA(tha)'. The Outlook is Stable.
- CIMB Thai Bank Public Company Limited's (CIMBT) National Long-Term Ratings affirmed at 'AA(tha)'. The Outlook is Stable.
- CIMB Securities (Thailand) Co., Ltd.'s (CIMBS) National Long-Term Ratings affirmed at 'AA(tha)'. The Outlook is Stable.
- Maybank Kim Eng Securities (Thailand) Public Company Limited's (MBKET) National Long-Term Rating affirmed at 'AA+(tha)'. The Outlook is stable.
A full list of rating action is at the end of this commentary.
KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SENIOR DEBT
The four entities' ratings are driven by institutional support. Fitch believes the entities are strategically important subsidiaries of their respective groups; United Overseas Bank Limited (UOB; AA-/Stable), CIMB Bank Berhad (CIMB) and Malayan Banking Berhad (Maybank; A-/Stable). All three parents hold a large majority stake in their subsidiaries, retain full management control of their Thai operations and integrate the subsidiaries closely with the groups. The parents allow the Thai entities to share their brands and have supported them financially and operationally.
Fitch rates the senior debt of UOBT and CIMBT at the same level as the entities' National Ratings, reflecting the unsecured and unsubordinated nature of these instruments, which rank pari passu with the banks' other senior unsecured obligations.
VIABILITY RATING
UOBT's Viability Rating primarily reflects its small local franchise and lower profitability compared with higher-rated local peers, which may be vulnerable to the continued weak operating environment. Nevertheless, the bank has exhibited sound asset-quality metrics, improving liquidity and solid core capitalisation in the previous few years and has managed the challenging operating environment better than most other similar or smaller sized banks.
SUBORDINATED DEBT
The agency rates CIMBT's subordinated unsecured debt instruments (lower Tier 2, Basel II-compliant instruments) one notch below the bank's National Long-Term Rating. The notching for these debt instruments reflects their subordination in the capital structure, and is consistent with Fitch's rating approach for such instruments.
RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND SENIOR DEBT
Any changes in UOB's Long-Term Foreign-Currency IDR would be unlikely to affect UOBT's IDR unless the parent was downgraded by more than a category, as it is currently capped by Thailand's Country Ceiling of 'A-'. A change in Thailand's Country Ceiling is likely to lead to similar rating action on UOBT's Long-Term Foreign-Currency IDR. UOBT's National Ratings and Support Rating are already the highest on each scale, so no upgrades are possible.
Changes in CIMB's credit profile would be likely to affect the National Ratings of CIMBT and CIMBS.
Changes in Maybank's rating could lead to changes in MBKET's National Ratings.
Fitch may downgrade the Thai entities' National Ratings if we determine that their respective parents have a lower propensity to provide them with extraordinary support, as indicated by a large decrease in ownership or a lower commitment to provide financial support. Neither scenario is expected by Fitch.
CIMBS's ratings are sensitive specifically to developments affecting its shareholding structure. CIMB Group is exploring a strategic partnership with the China Galaxy Securities Company Limited brokerage business and is negotiating the terms of a partial sale of its current shareholding. The effect on CIMBS's ratings will depend on the final business model and shareholding structure. If the group significantly reduces its shareholding - not the agency's base case - Fitch may reassess the propensity of CIMB to support CIMBS. Fitch may also need to assess whether CIMB remains the support provider for CIMBS, or whether this should be changed to the group entity overseeing the brokerage business. These assessments could lead to a change in CIMBS's National Ratings.
Changes in UOBT's National Long-Term Rating or CIMBT's National Short-Term Rating would lead to a similar change of their senior debt ratings.
VIABILITY RATING
Fitch may upgrade UOBT's Viability Rating if, despite the challenging environment, the bank sustains its sound asset quality and improves its profitability, with no major increase in risk appetite. Conversely, the agency may downgrade the bank's Viability Rating if its reserve coverage or capitalisation deteriorates significantly over a prolonged period.
SUBORDINATED DEBT
Changes in CIMBT's National Long-Term Rating would similarly affect the rating of its subordinated debt.
The rating actions are as follows:
UOBT:
- Long-Term Foreign-Currency IDR affirmed at 'A-'; Outlook Stable
- Short-Term Foreign-Currency IDR affirmed at 'F2'
- Viability Rating affirmed at 'bb+'
- Support Rating affirmed at '1'
- National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
- National Short-Term Rating affirmed at 'F1+(tha)'
- National Long-Term Rating on senior unsecured debt affirmed at 'AAA(tha)'
CIMBT:
- National Long-Term Rating affirmed at 'AA(tha)'; Outlook Stable
- National Short-Term Rating affirmed at 'F1+(tha)'
- National Short-Term Rating on senior unsecured debt affirmed at 'F1+(tha)'
- National Long-Term Rating on subordinated debt (lower Tier 2) affirmed at 'AA-(tha)'
CIMBS:
- National Long-Term Rating affirmed at 'AA(tha)'; Outlook Stable
- National Short-Term Rating affirmed at 'F1+(tha)'
MBKET:
- National Long-Term Rating affirmed at 'AA+(tha)'; Outlook Stable
- National Short-Term Rating affirmed at 'F1+(tha)'