RAM Ratings has reaffirmed the AA2/Stable/P1 financial institution ratings of CIMB Thai Bank Public Company Limited (the Bank) as well as the AA3/Stable rating of its RM2 billion Tier-2 Subordinated Debt Programme.

Published on 07 Jul 2017.

RAM Ratings has reaffirmed the AA2/Stable/P1 financial institution ratings of CIMB Thai Bank Public Company Limited (the Bank) as well as the AA3/Stable rating of its RM2 billion Tier-2 Subordinated Debt Programme.

The Bank is strategically important to CIMB Group, as a key component of the Group’s ASEAN franchise. CIMB Group’s commitment to the Bank is reflected in its 94.1% ownership of the latter, the sharing of a common franchise, management oversight, the availability of contingency liquidity support from the Group and its track record of capital infusions (most recently demonstrated in 1Q 2017). The Bank is expected to be able to count on strong parental support in times of stress. 

Amidst the challenging operating environment in Thailand, RAM anticipates 2017 to be another difficult year for CIMB Thai. The Bank posted a net loss of THB630 million in FY Dec 2016, weighed down by hefty impairment charges. While it had returned to the black in 1Q fiscal 2017, CIMB Thai’s still-high level of delinquencies – special-mention loans (i.e., delinquencies more than 30 days past due but yet to be classified as impaired) which made up 6.2% of total loans as at end-December 2016 – remained a potential source of impairments and provisioning requirements. As at end-March 2017, the Bank’s gross impaired loan ratio was a lower 5.6% following a THB2.5 billion sale of impaired loans. Its annualised credit cost ratio was still high at 2.4% in 1Q FY Dec 2017 and is likely to remain so in the near term. Full-year loan growth is expected to stay in the low single digits, driven by selective expansion in the consumer and corporate segments. On a positive note, the Bank’s tier-1 and total capital ratios are anticipated to climb to a respective 13.5% and 19.1% (pro forma based on 31 March 2017 position) with the completion of a THB5.5 billion rights issue. 

Analytical contact
Chan Yin Huei
(603) 7628 1180
yinhuei@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my