Fitch Affirms National Ratings on Three Foreign-Owned Securities Companies in Thailand

CGS-CIMB Securities (Thailand) Co., Ltd. (CGS-CIMB TH) at 'A(tha)'

Maybank Securities (Thailand) Public Company Limited (MST) at 'AA(tha)'

Yuanta Securities (Thailand) Company Limited (YSTH) at 'AA(tha)'

The Outlooks are Stable.

A full list of rating actions is included at the end of this commentary.

KEY RATING DRIVERS
National Ratings and Senior Debt

The ratings on CGS-CIMB TH, MST and YSTH are underpinned by Fitch's expectation of shareholder support from CGS-CIMB Securities International Pte. Ltd. (CGS-CSI), Malayan Banking Berhad (Maybank) and Yuanta Financial Holdings Co., Ltd. (YFHC; BBB+/Stable/bbb+), respectively.

Fitch believes that MST and YSTH are strategically important subsidiaries of their respective groups. MST and YSTH play key roles in their parent groups' strategies for south-east Asia, exhibiting strong synergies with their parents' overall operations. There is clear brand alignment with the respective parents, as well as ongoing operational and marketing synergies.

Furthermore, there are high levels of ownership — YFHC owns 99.9% of YSTH and Maybank owns 83.5% of MST — with significant levels of management control and oversight. The ratings also reflect both subsidiaries' modest balance sheets relative to their respective groups, which means that their parents would have the financial resources to provide any required support.

Fitch views CGS-CIMB TH as a core subsidiary of its parent, CGS-CSI. CGS-CSI views Thailand as one of its core markets, and the subsidiary is an integral part of the group's network in south-east Asia. CGS-CIMB TH accounted for a significant 9% and 19% of CGS-CSI's assets and profit base, respectively, as of December-2021.

Furthermore, CGS-CIMB TH taps its parent's regional network, technical know-how and risk management framework to diversify its products and revenue base. We believe a default by CGS-CIMB TH would severely damage CGS-CSI's reputation, due to the close-to-full ownership and shared branding between the two.

CGS-CSI is 75%-owned by China Galaxy International Financial Holdings Limited (CGI), a wholly owned subsidiary of China Galaxy Securities Co. Ltd. (CGS). The remaining 25% is owned by Malaysian banking group, CIMB Group Sdn Bhd. CGS-CSI's ability to support CGS-CIMB TH benefits from support uplift from CGS, which controls CGS-CSI.

YSTH's short-term debenture programme is rated at the same level as its National Short-Term Rating, as issuances under the programme will constitute the company's unsubordinated and unsecured obligations.

RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
National Ratings and Senior Debt

Any weakening in their parents' credit profiles could lead to negative action on CGS-CIMB TH, MST and YSTH's National Long-Term Ratings. For YSTH, this would be driven by negative action on YFHC's Viability Rating.

A decline in the parents' propensity to support their subsidiaries could also affect the ratings. This may occur if the parents reduce their shareholdings in their respective subsidiaries to below 75%, combined with reduced management control, operational links or business synergies. Fitch would also consider each entity's support-driven credit profile relative to other entities rated on Thailand's National Rating scale. However, Fitch does not expect significant reductions in parental support propensity for these entities in the near to medium term.

The National Short-Term Ratings on MST and YSTH would be downgraded if their National Long-Term Ratings were to be downgraded to 'A(tha)' or below. CGS-CIMB TH's National Short-Term Rating would be downgraded if its National Long-Term Rating was downgraded to 'BBB+(tha)' or below.

A downgrade of YSTH's National Short-Term Rating would lead to a downgrade of its short-term senior unsecured debt programme rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:
National Ratings and Senior Debt

We may upgrade the National Long-Term Ratings on CGS-CIMB TH, MST and YSTH if their respective parents' credit profiles strengthen, indicating increased ability to support their subsidiaries. For YSTH, this would likely be reflected in positive action on YFHC's Viability Rating.

The National Long-Term Ratings may also be upgraded if Fitch believes that the shareholders' willingness to provide support to their Thai subsidiaries have increased. This may occur if Fitch believes that MST and YSTH have become even more important to their respective group franchises, for example due a shift in the parents' strategies to further emphasise their Thai securities businesses, perhaps with substantial investments in resourcing and footprint for YSTH.

For CGS-CIMB TH, there may be upside if Fitch sees evidence of stronger integration with CGS-CSI, for example due to increased group support and referrals that improve the subsidiary's revenue diversification and profit pool for a sustained period.

There is no upside to the National Short-Term Ratings on MST and YSTH, and on YSTH's senior debt programme, as the ratings are already at the top end of the National Rating scale. CGS-CIMB TH's National Short-Term Rating may be upgraded if the company's National Long-Term Rating is upgraded to 'A+(tha)'.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The ratings on CGS-CIMB TH, MST and YSTH are linked to the credit profiles of their parents, CGS-CSI, Maybank and YFHC, respectively.

Additional information is available on www.fitchratings.com