Thailand Financial News

Moody’s Investors Service has upgraded Kasikornbank Public Company Limited’s (”KBank”) bank financial strength
rating (”BFSR”) to “D+” from “D”. The bank’s debt and deposit ratings are unaffected by this action. The outlook for all ratings is stable.

Moody’s consider both its regulatory and economic capital base as satisfactory. Thanks to the reduction in its non-performing loans (”NPL”) and the recovery in its profitability, the bank has built up its capital base, leading to more than a tripling in its capital since 2001. Furthermore, despite solid lending growth in recent years, its regulatory capital level, including the core Tier-1 portion, remains acceptable. Based on Moody’s estimates, the bank also possesses satisfactory economic capital (adjusted for possible additional loan losses), and which would support not only the expansion of its loan book, but also provide a cushion against any rapid increase in NPL. But the latter is unlikely under Moody’s current assessment of the Thai economy. “KBank’s profitability, defined as risk-adjusted pre-provision profit, rose rapidly over the past few years due to the widening of net interest margins, management’s efforts to boost its fee income, and a controlled cost base,” says Wah. “Further improvements in profitability would likely hinge on KBank’s growing exposure to small- and medium-sized enterprises, which could however be sensitive to economic development, and its ability to enhance credit quality,” adds Wah. For future rating actions, Moody’s will focus on: 1) possible further improvement in KBank’s economic solvency through NPL resolution; and 2) its ability to remain one of the leaders in risk management in the Thai banking sector, which has seen continual improvements in this area. But as the rating agency does not expect such performances to change drastically over the next few years, it has therefore considered the stable as outlook. Headquartered in Bangkok, KBank is Thailand’s fourth largest bank, with total assets of Bt 844 billion (US$22 billion) as at end-June 2006. The following rating was upgraded: Kasikornbank Public Company Limited — Bank financial strength rating to “D+” from “D”. The other ratings — which are unchanged — are: Kasikornbank Public Company Limited — Foreign currency long-term/short-term deposit ratings of Baa1/P-2 and subordinated long-term debt rating of Baa2. Kasikornbank Public Co. Ltd (Cayman Islands) — Foreign currency subordinated long-term debt rating of Baa2. Hong Kong
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