Fitch ratings agency upgrades nine Thai financial institutions


International ratings agency Fitch raised the ratings of nine Thai banks and financial institutions last week, with several upgraded to AA+, including Bangkok Bank, Siam Commercial Bank and Kasikorn Bank, three of the largest in the nation, in another sign that Thailand’s financial sector, a cornerstone of the economy, continues to advance and become more competitive.

The other two financial institutions that had their ratings raised to AA+ were Easy Buy and Maybank Kim Eng Securities. Fitch also raised the ratings of Kasikorn Securities, SCB (Siam Commercial Bank) Securities, CIMB Thai Bank and CIMB Securities Thailand to AA from AA-. Except for Easy Buy and Maybank Kim Eng Securities, the outlook for all the other banks and financial institutions were declared stable.

The Economist Intelligence Unit recently described the Thai banking sector as healthy, noting the ratio of banks’ total capital to their risk-weighted assets stood at 16.7 percent, higher than the amount required under Basel III banking regulations. The lukewarm economy of the past two years “has not led to a dramatic increase in non-performing loans (NPLs). The sector continues to boast one of the lowest ratios of NPLs to total loans in Asia, with an NPL ratio of 2.5 percent,” the Economist wrote.

Fitch undertook a ratings review of Thai financial institutions following its slight downgrade of the country’s sovereign long-term local-currency credit rating from A- to BBB+. This mainly affects the bond market. Fitch recently downgraded several countries following its implementation of a new set of criteria for sovereign ratings. Fitch rates banks and financial institution in relation to the national sovereign rating, and a change in the national rating prompted a review of institutions’ ratings.

The ratings agency cited weak growth prospects and political uncertainties for the lower rating, but also pointed to many strengths and positive aspects of Thailand’s fiscal and economic situation.

“International reserves have increased by over 10 percent year to date, as of May 2016. The benefits of Thailand’s strong external balance sheet was evident during recent bouts of financial market volatility, as other emerging markets faced economic and financial disruptions from rapid reversals of capital inflows,” Fitch said in a press release.

The agency also praised Thailand’s “sound public finances.” Although public debt is expected to rise as the government spends to invest in a massive infrastructure upgrade over the next several years, Fitch said it “expects gross general government debt to rise to 33.1 percent of gross domestic product in [fiscal year] 2018, still low compared with the median of 42.2 percent,” for countries in the same ratings category as Thailand.