Fitch Upgrades Thailand's TMB, TBANK, TCAP and UOBT; Affirms Other Mid- and Small-Sized Banks

          Fitch Ratings has upgraded the National Long-Term Ratings of Thailand-based TMB Bank Public Company Limited and Thanachart Bank Public Company Limited (TBANK) to 'AA-(tha)', from 'A+(tha)', and the National Long-Term Rating of TBANK's holding company, Thanachart Capital Public Company Limited (TCAP), to 'A+(tha)', from 'A(tha)' and its National Short-Term Rating to 'FFitch Ratings+(tha)', from 'FFitch Ratings(tha)'. The Outlooks are Stable. At the same time, Fitch has upgraded TMB's Basel III Tier 2 subordinated notes to 'A+(tha)', from 'A(tha)', and the Viability Rating of United Overseas Bank (Thai) Public Company Limited (UOBT) to 'bbb-', from 'bb+'.

          Fitch has affirmed the banks' remaining ratings as well as the ratings on the following subsidiaries of foreign financial institutions in Thailand: 
          - CIMB Thai Bank Public Company Limited (CIMBT)
          - Bank of China (Thai) Public Company Limited (BOCT) 
          - Industrial and Commercial Bank of China (Thai) Public Company Limited (ICBCT)
          - ICBC (Thai) Leasing Company Limited (ICBCTL)

          Fitch has also affirmed CIMB Thai Auto Co., Ltd.'s bond issue guaranteed by CIMBT.
          A full list of rating actions is at the end of this commentary.

          KEY RATING DRIVERS 
          IDRS, NATIONAL RATINGS AND SENIOR DEBT
          TMB's Issuer Default Ratings (IDR) and National Ratings are driven by the bank's standalone profile, which Fitch captures in its Viability Rating. The upgrade for TMB's National Long-Term Rating reflects Fitch's assessment of reduced gaps, such as asset quality, when comparing TMB's credit profile with Thailand's higher-rated private-sector banks. These higher-rated banks have National Ratings of 'AA+(tha)', although their Viability Ratings of 'bbb+' equate to Thailand's (BBB+/Stable) ratings. Fitch expects TMB's narrower gaps with higher-rated banks to be sustainable and last through economic cycles.
          TBANK's National Ratings also reflect the bank's standalone fundamentals, with the rating upgrade following the bank's improving financial profile, particularly in asset quality. This has reduced the gap in the bank's credit profile compared with higher-rated domestic peers. TBANK is Thailand's sixth-largest bank by deposits and has a moderate franchise domestically. The bank is a leader in the hire-purchase segment and has been receiving operational, funding and management support from its 49% shareholder, The Bank of Nova Scotia (AA-/Stable). 
          Fitch has notched down TCAP's National Long-Term Rating once from its key operating subsidiary, TBANK, to address the structural subordination of the holding company and the presence of large minority interests, in accordance with Fitch's criteria.
          Fitch has used its institutional-support framework to rate the remaining entities. The agency believes the companies would benefit from extraordinary support from their parents, namely, Bank of China (Hong Kong) Limited (A/Stable), Industrial and Commercial Bank of China Limited (A/Stable), United Overseas Bank Limited (UOB; AA-/Stable) and CIMB Bank Berhad. Fitch sees the Thai subsidiaries as strategically important to the groups, as the parent entities have majority stakes in the subsidiaries, exercise management control, integrate the subsidiaries closely with their group and share their brands. 
          The agency sees ICBCTL as a core subsidiary of its parent bank, ICBCT, and equalises the two entities' National Ratings. ICBCTL operates ICBCT's key hire-purchase business, which represents about a third of its consolidated loans. 
          The senior debt instrument and programme ratings for all entities are equalised with their National Long-Term Ratings, consistent with Fitch's approach for rating senior debt instruments.

          GUARANTEED DEBT 
          Fitch rates ICBCTL's guaranteed bonds at the same level as ICBCT's National Long-Term Rating of 'AAA(tha)' to reflect the unconditional and irrevocable guarantee the bank provides on the bonds. The Stable Outlook on the guaranteed bonds is the same as the Outlook on the guarantor. 
          Similarly, CIMBT's unconditional and irrevocable guarantee for CIMBT Auto's bond underpins the instrument's 'AA-(tha)' rating. CIMBT directly owns 99.99% of CIMBT Auto. 

          VIABILITY RATINGS
          The upgrade of UOBT's Viability Rating reflects its improving financial performance, particularly in terms of earnings, funding and liquidity, which Fitch expects to be sustained over the medium term. The Viability Rating also takes into account the bank's smaller domestic franchise as Thailand's eighth-largest bank by deposits, with a market share of around 3%, and limited revenue diversification. This is balanced against UOBT's strengthening earning capacity. Fitch also factors in ordinary support from the parent bank, UOB; for example, in terms of marketing, management and funding. 
          TMB's Viability Rating reflects its standalone fundamentals and its moderate domestic franchise as Thailand's seventh-largest bank by deposits, with a market share of about 5%. TMB's financials have improved steadily, narrowing gaps with larger peers, particularly in asset quality. Fitch expects TMB's financials to remain stable, despite increasing risk appetite in the SME and home mortgage segments. 

          SUPPORT RATING AND SUPPORT RATING FLOOR
          TMB's support ratings reflect the likelihood of extraordinary sovereign support in case of need. Its Support Rating Floor of 'BB+' indicates its systemic importance as a mid-tier bank and is one notch below the Support Rating Floors of Thailand's domestic systemically-important banks. 
          UOBT's Support Rating reflects Fitch's view that there is an extremely high likelihood of external support from its parent, UOB. 

          SUBORDINATED DEBT
          The upgrade of TMB's Basel III Tier 2 subordinated notes mirrors the upgrade of its National Long-Term Rating. The notes are notched once from the bank's National Long-Term Rating, reflecting higher loss severity risks relative to senior debt instruments and a lack of mandatory full write-down features. 
          The Basel III Tier 2 notes of ICBCT and UOBT are similarly rated one notch down from the banks' National Long-Term Ratings to reflect the fact that the instruments do not incorporate going-concern loss-absorption features or a mandatory full write-down feature at non-viability.

          RATING SENSITIVITIES
          IDRS, NATIONAL RATINGS AND SENIOR DEBT
          TMB's IDRs, National Ratings and senior-debt ratings are sensitive to changes in the bank's Viability Rating. 
          TBANK's National Ratings could be upgraded if its company profile were to significantly strengthen, leading to a structural improvement in its financial profile. However, this is not probable over the next few years. Conversely, the agency could downgrade TBANK's ratings if recent improvements in the bank's financials were to sharply deteriorate in comparison with the performance of domestic peers. However, this is not Fitch's base-case scenario. 
          Any change in TBANK's National Ratings is likely to have the same effect on TCAP's ratings. Furthermore, Fitch may widen the notching gap between TCAP and TBANK if TCAP's double-leverage ratio were to significantly increase without adequate liquidity buffers.
          The National Ratings of BOCT, ICBCT and ICBCTL are already at the top-end of the scale, meaning there is no rating upside. Fitch may downgrade the ratings if the ratings of the subsidiaries' respective parents are downgraded to below Thailand's Long-term Local-Currency IDR. The agency may also revise the subsidiaries' ratings if there is a change in their parents' propensity to provide them with extraordinary support. This may occur if the parents significantly reduce their ownership or financial commitments, which could lead to negative rating action. 
          UOBT's National Ratings are already the highest on the national scale, meaning there is no upside. UOBT's IDRs are sensitive to changes in Thailand's Country Ceiling, which caps its Long-Term IDR at 'A-', but less so to changes in UOB's IDRs. Fitch would revise UOBT's IDR downwards if its parent were to face a downgrade of multiple notches of its 'AA-' Long-Term IDR. 
          Fitch would downgrade CIMBT's National Long-Term Rating if CIMB Bank Berhad's credit profile were to deteriorate or if the parent were to reduce its propensity to extend extraordinary support. This could happen if the parent significantly reduced its shareholding or withheld commitments to supporting its Thai subsidiary financially. 
          The senior debt ratings of UOBT, CIMBT and ICBCTL are sensitive to changes in their National Ratings.

          GUARANTEED DEBT
          The ratings of ICBCTL's guaranteed bonds are at the highest level on the Thai national scale, meaning there is no possible upside. ICBCTL's guaranteed bonds are sensitive to changes in ICBCT's ratings. 
          Similarly, the rating on CIMBT Auto's guaranteed bond would be directly affected by changes in CIMBT's National Long-Term Rating.

          VIABILITY RATINGS
          Fitch may upgrade TMB's Viability Rating if the bank significantly improves its domestic franchise and most of its core financial metrics - including earnings and capital - sustainably and significantly over the medium-term without a corresponding increase in its risk appetite. Conversely, the Viability Rating could face pressure if TMB's financial metrics were to deteriorate sharply relative to domestic and international peers, such as may occur from an unexpected deterioration in the operating environment.
          UOBT's Viability Rating could see upside if the bank shows that it can further improve its profitability and expands its franchise and scale relative to Thailand's medium-sized banks - although this appears unlikely to occur in the short term. Conversely, the agency may downgrade the bank's Viability Rating if the bank's profitability, asset quality or capitalisation were to deteriorate sharply, such as due to an unanticipated increase in risk taking. 

          SUPPORT RATING AND SUPPORT RATING FLOOR 
          Fitch may change TMB's Support Rating and Support Rating Floor if the agency believes the bank's perceived importance to the banking system has changed.
          UOBT's Support Rating of 'Fitch Ratings' is already at the highest level, meaning there is no upside.

          SUBORDINATED DEBT 
          The subordinated debt ratings of TMB, ICBCT and UOBT are broadly sensitive to the same factors affecting their National Long-Term Ratings. 

          The rating actions are as follows: 
          TMB
          - Long-Term IDR affirmed at 'BBB-'; Outlook Stable
          - Short-Term IDR affirmed at 'F3'
          - Viability Rating affirmed at 'bbb-'
          - Support Rating affirmed at '3'
          - Support Rating Floor affirmed at 'BB+'
          - National Long-Term Rating upgraded to 'AA-(tha)', from 'A+(tha)'; Outlook Stable
          - National Short-Term Rating affirmed at 'FFitch Ratings+(tha)'
          - USD3.Thanachart Bank billion senior unsecured euro medium-term note programme affirmed at 'BBB-'
          - Long-term foreign-currency senior unsecured debt affirmed at 'BBB-'
          - Basel III Tier 2 subordinated debt upgraded to 'A+(tha)', from 'A(tha)' 

          TBANK
          - National Long-Term Rating upgraded to 'AA-(tha)', from 'A+(tha)'; Outlook Stable
          - National Short-Term Rating affirmed at 'FFitch Ratings+(tha)'

          TCAP
          - National Long-Term Rating upgraded to 'A+(tha)', from 'A(tha)'; Outlook Stable
          - National Short-Term Rating upgraded to 'FFitch Ratings+(tha), from 'FFitch Ratings(tha)'

          UOBT:
          - Long-Term Foreign-Currency IDR affirmed at 'A-'; Outlook Stable
          - Short-Term Foreign-Currency IDR affirmed at 'F2'
          - Viability Rating upgraded to 'bbb-' from 'bb+'
          - Support Rating affirmed at 'Fitch Ratings'
          - National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
          - National Short-Term Rating affirmed at 'FFitch Ratings+(tha)'
          - National Long-Term Rating on senior unsecured debt affirmed at 'AAA(tha)'
          - Basel III Tier 2 subordinated debt affirmed at 'AA+(tha)'

          CIMBT:
          - National Long-Term Rating affirmed at 'AA-(tha)'; Outlook Stable
          - National Short-Term Rating affirmed at 'FFitch Ratings+(tha)'
          - National Short-Term Rating on short-term debt programme affirmed at 'FFitch Ratings+(tha)'

          CIMBT Auto:
          - National Long-Term Rating on guaranteed bond affirmed at 'AA-(tha)'; Outlook Stable

          BOCT:
          - National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
          - National Short-Term Rating affirmed at 'FFitch Ratings+(tha)'

          ICBCT:
          - National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
          - National Short-Term Rating affirmed at 'FFitch Ratings+(tha)'
          - Basel III Tier 2 subordinated debt affirmed at 'AA+(tha)'

          ICBCTL:
          - National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
          - National Short-Term Rating affirmed at 'FFitch Ratings+(tha)'
          - National Long-Term Rating on bonds guaranteed by ICBCT affirmed at 'AAA(tha)'; Outlook Stable
          - National Long-Term Rating on senior unsecured debt affirmed at 'AAA(tha)'
          - National Ratings on senior unsecured medium-term note programme affirmed at 'AAA(tha)'/'FFitch Ratings(tha)'