Fitch Upgrades Standard Chartered Bank (Thai)#s Short-Term Ratings to #F1#; Outlook Stable

Stocks and Financial Services Press Releases Thursday September 5, 2019 14:50
Bangkok--5 Sep--Fitch Ratings

Fitch Ratings has upgraded Standard Chartered Bank (Thai) Public Company Limited's (SCBT) Short-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to 'F1' from 'F2'. At the same time, the agency has affirmed the bank's Long-Term Foreign- and Local-Currency IDRs at 'A-' with a Stable Outlook.

Fitch is also affirming and withdrawing SCBT's senior unsecured national short-term debt rating of 'F1+(tha)' because the bank is no longer issuing debt under this programme.

Fitch has affirmed SCBT's Long-Term IDRs, National Ratings and senior debt ratings, while upgrading its Short-Term IDRs by one notch to 'F1' as part of the agency's broader re-assessment of short-term ratings across support-driven financial institutions. The upgrade also mirrors a recent rating action on the Thai sovereign in May 2019. See the rating action commentary "Fitch Upgrades Short-Term Ratings of Six Sovereigns, Removes from UCO", dated 24 May 2019.

Fitch rates SCBT's Long-Term IDR one notch below the Viability Rating (VR) of Standard Chartered Bank (SCB, A+/Stable/a) to reflect the high probability of extraordinary support from SCB, if needed. The 99.9%-owned Thai subsidiary shares strong synergies with its parent, playing a strategically important role in supporting the group's international businesses. However, we believe it is a less integral subsidiary than other group companies. SCBT also shares the parent's brand, and is operationally integrated within the group. The group also exercises full management control over SCBT. Fitch has used the parent's VR instead of its IDR as the anchor rating for institutional support in light of the uncertainty over whether SCBT would benefit from a significant buffer of qualifying junior debt that uplifts its parent's Long-Term IDR above its VR.

The National Ratings on SCBT and its senior debt are at highest level of 'AAA(tha)'/'F1+(tha)' since the bank's credit profile, as reflected in the Long-Term Local-Currency IDR of 'A-', remains stronger than the Thailand's sovereign Long-Term Local-Currency IDR of 'BBB+'.

Fitch has affirmed SCBT's Support Rating to highlight the extremely high probability of timely support from SCB under extraordinary circumstances.

SCBT's VR reflects the bank's sound domestic franchise in corporate and institutional banking compared with Thailand's foreign and mid-size domestic banks. SCBT has re-positioned itself in the past few years following the sale of its retail business and the wind-down of its commercial banking, leading to a more concentrated operating model. However, SCBT's focus on the corporate and institutional banking attests to quality clients and indicates a conservative risk appetite relative to the Thai banking sector.

Capitalisation is a rating strength for the bank's VR. SCBT has a high Common Tier 1 ratio of over 40% at end-2018, although the bank is likely to continue optimising its capital structure by reviewing different options. This healthy capitalisation level is further supported by SCBT's sound funding and liquidity profile (also a relative rating strength for the VR). In addition, SCBT is continuing to dispose of its legacy impaired loans. However, the bank faces a degree of earnings uncertainty as a result of unresolved global trade tensions affecting SCBT's businesses related to trade flows. We consider earnings to be a rating weakness for the bank's VR.


SCBT's IDRs, senior debt ratings, and Support Rating are sensitive to changes in SCB's propensity and ability to support SCBT in extraordinary times. Fitch measures SCB's ability through its VR. A downgrade of SCB's VR would affect SCBT's ratings. An upgrade of the SCB's VR would affect only SCBT's Local-Currency IDR as the Foreign-Currency IDR is capped by Thailand's Country Ceiling of 'A-'. On propensity, Fitch could take negative rating actions if the bank were to become less strategically important to SCB or if SCB significantly reduced its ownership of SCBT.

SCBT's National Ratings, which represent creditworthiness relative to the Thai sovereign, are already at the top end of the scale, meaning there is no rating upside. A downgrade is deemed unlikely at this stage in light of SCBT's robust, institutionally supported profile relative to the Thai sovereign.


Fitch may upgrade SCBT's VR if SCBT's franchise and business model were to improve significantly and demonstrate a high level of diversification, and if its earnings profile were to show resilience in the face of challenges. Fitch sees greater diversification as improbable because of the bank's focus on the corporate and institutional segments in Thailand, although the degree of resilience could still vary.

Conversely, SCBT's VR could come under pressure if the bank's franchise were to deteriorate sharply and if its profitability or asset quality were to come under significant and persistent pressure over the medium term. A substantial reduction in capitalisation could also result in a VR downgrade.

SCBT's international and national ratings are linked to SCB's VR.

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