Fitch: Thai Banks Face Another Tough Year In 2008 But Resilient Amid Global Shocks
Fitch Ratings said today that Thai banks’ results in 2007 were impacted by higher provisioning under new regulatory rules, as well as a slowdown in the domestic economy arising from the political uncertainty following the September 2006 coup. Banks with lower levels of reserves were impacted the most, with significant losses reported by some banks - notably TMB Bank Public Company Limited (TMB) which was recapitalised at end-December 2007 with a capital injection from ING Bank NV (rated ‘AA’).
Barring further economic or political shocks, lower provisioning and higher loan growth should see stronger results in 2008 for the Thai bank sector.
“The profitability of the system was poorer in 2007, although the stronger banks continued to perform well, namely Siam Commercial Bank Public Company Limited (SCB), Kasikornbank Public Company Limited (KBANK) and Bangkok Bank Public Company Limited (BBL) - each rated ‘BBB+’,” said Vincent Milton, Managing Director of Fitch’s Thai office and Senior Director of Financial Institutions. Of note, despite the weaker economic sentiment, these three largest private banks have accelerated lending, particularly to the consumer and medium size business segments. “The outlook for 2008 should be brighter, as the provisioning burden is lifted and consumption and investment spending by Thai consumers and businesses pick up. Nonetheless, the operating environment remains challenging and credit and market risks have heightened as a result of the global financial shocks witnessed in recent months,” added Mr. Milton. The main concerns related to these shocks so far, have been direct exposure to collateralised debt obligations (CDOs) and other structured investments as well as funding risks arising out of a flight of confidence by depositors and creditors.