Thailand Financial News

Fitch Ratings has affirmed the ratings of Eighteenth Bank, Ltd. (Eighteenth), Higashi-Nippon Bank, Ltd. (Higashi-Nippon), Suruga Bank, Ltd. (Suruga) and Toho Bank, Ltd. (Toho) while revising the ratings Outlook of these four banks. At the same time, it has affirmed the ratings of Momiji Bank, Ltd.

(Momiji) and Yamaguchi Bank, Ltd. (Yamaguchi). The ratings are as follows:

Eighteenth: Long-term foreign and local currency Issuer Default Ratings (IDRs) affirmed at ‘BBB’, Short-term foreign and local currency IDRs affirmed at ‘F2′, Individual Rating affirmed at ‘C’ and Support Rating affirmed at ‘3′. The rating Outlook has been changed to ‘Positive’ from ‘Stable’. The Support Rating floor of ‘BB-’ (BB minus) remains unchanged. Higashi-Nippon: Long-term foreign and local currency IDRs affirmed at ‘BBB-’ (BBB minus), Short-term foreign and local currency IDRs affirmed at ‘F3′, Individual Rating affirmed at ‘C/D’ and Support Rating affirmed at ‘4′. The rating Outlook has been changed to ‘Positive’ from ‘Stable’. The Support Rating floor of ‘B’ remains unchanged. Suruga: Long-term foreign and local currency IDRs affirmed at ‘BBB+’, Short-term foreign and local currency IDRs affirmed at ‘F2′, Individual Rating affirmed at ‘C’ and Support Rating affirmed at ‘4′. The rating Outlook has been changed to ‘Positive’ from ‘Stable’. The Support Rating floor of ‘B’ remains unchanged. Toho: Long-term foreign and local currency IDRs affirmed at ‘BBB’, Short-term foreign and local currency IDRs affirmed at ‘F2′, Individual Rating affirmed at ‘C’ and Support Rating affirmed at ‘2′. The rating Outlook has been changed to ‘Positive’ from ‘Stable’. The Support Rating floor of ‘BBB-’ (BBB minus) remains unchanged. Momiji: Long-term foreign and local currency IDRs affirmed at ‘BBB+’, Short-term foreign and local currency IDRs affirmed at ‘F2′, Individual Rating affirmed at ‘D’ and Support Rating affirmed at ‘2′. The rating Outlook remains Stable and the Support Rating floor of ‘BBB-’ (BBB minus) remains unchanged. Yamaguchi: Long-term foreign and local currency IDRs affirmed at ‘BBB+’, Short-term foreign and local currency IDRs affirmed at ‘F2′, Individual Rating affirmed at ‘C’ and Support Rating affirmed at ‘2′. The rating Outlook remains Stable and the Support Rating floor of ‘BBB-’ (BBB minus) remains unchanged. Eighteenth Bank has recovered well from a disastrous showing for the financial year ended March 2005. Its capital base and asset quality are back to the pre-2005 period. This recuperating trend is the basis of our Outlook revision. However, its profitability needs further improvement, having been dragged down by intensifying local competition and the weak local economy. Higashi-Nippon Bank maintains a high loan-to-deposit ratio, which stood at 85% at end-March 2006, and its top-line profitability largely depends on loan interest revenues. A growth in generally lucrative loans to the real estate sector against the backdrop of a recent construction boom in the city area underpins its relatively good top-line profitability. Higashi-Nippon has written off a substantial amount of bad loans in the last couple of years and net risk-monitored loan (RML) to total lending ratio declined by almost half to over 3% at end-September 2006, from the recent peak level of over 6% at end-March 2002. Suruga Bank’s rating Outlook was revised to Positive, driven by its strong profitability and the improvement in the credit quality of its loan portfolio and in its capital position. Toho’s rating Outlook was revised to Positive, driven by a continuing improvement in its asset quality and capital position, as well as its increasing interest revenue. While the loss related to bond sales was a drag on the top-line revenue in FYE07, a decrease of interest rate risk on its bond portfolio is viewed positively by Fitch. Momiji Bank and Yamaguchi Bank have been consolidated under a holding company, Yamaguchi Financial Group (Yamaguchi FG), which was established in October 2006 and the two banks have since aligned their provisioning policies. As a result, Momiji made a large provisioning for the latest financial year ended March 2007, which depleted its Tier 1 capital. The supporting factor for its IDRs is the strong local franchise of Yamaguchi Bank and its financial strength. Yamaguchi Bank’s stand alone balance sheet strength is relatively good considering its asset quality and capital standing. The RML to total loan ratio was comparatively low at 1.9%, while pure Tier 1 ratio stood at a little over 8% at end-September 2006. On the other hand, uncertainty over the negative effect from Momoji Bank on the bank’s parent company, Yamaguchi FG, will remain, at least in the short term. –www.theasianbanker.com (April 30 2007)–