FW: RAM Ratings reaffirms CIMB Thai’s AA2/Stable/P1 rating

 

Published on 09 Aug 2018.

RAM Ratings has reaffirmed CIMB Thai Bank Public Company Limited's (the Bank) AA2/Stable/P1 financial institution ratings (FIRs) as well as the AA3/Stable rating of the Bank's RM2 billion Tier-2 Subordinated Debt Programme (2014/2044). The reaffirmation is premised on our expectation that support will remain forthcoming from its parent CIMB Group (corporate credit rating of AA1/Stable/P1) – notwithstanding regulations that would halt the Group's capital injections from November 2018 onwards. RAM views that while CIMB Group will not be able to extend direct capital support going forward, it will remain committed to employing other channels of extraordinary support in times of need, which could include injecting tier-2 capital, offloading CIMB Thai's impaired loans to a sister company and providing a contingent liquidity line to the Bank.

CIMB Thai represents the Group's presence in the Thai banking sector and is integral to the latter's broader ASEAN aspirations. CIMB Group has demonstrated strong support with multiple equity injections over the last 10 years – most recently in 2015 and 2017 when the Bank was faced with asset quality challenges. In view of the restriction on direct capital support post-October 2018, the Group will be executing a final capital injection which would raise the Bank's common equity tier-1 (CET-1) capital ratio to about 14% (end-June 2018: 12.0%). 

Following the disposal of impaired loans last year, the Bank clocked in a lower gross impaired-loan (GIL) ratio of 5.9% as at end-June 2018 (end-December 2016: 6.2%) – although this was counterbalanced by weaknesses in its rubber exposures resulting from a prolonged period of low rubber prices. CIMB Thai believes it has largely resolved the asset quality pressures and intends to continue to sell impaired loans to manage its GIL ratio. We derive some comfort from the Bank's stronger loss absorption buffers which will cushion unexpected credit deterioration to a certain extent. CIMB Thai's loan-loss reserve coverage and CET-1 capital ratio were a higher 90% and 12.0% as at end-June 2018, respectively (end-December 2016: 77% and 10.7%). 

 

Analytical contact
Loh Kit Yoong
(603) 7628 1031
kityoong@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
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