Fitch Rates ICBC (Thai) Leasing 'AAA(tha)'; Outlook Stable


 

The ratings reflect a very high support probability from its sole shareholder Industrial and Commercial Bank of China (Thai) Public Company Limited (ICBCT; 'AAA(tha)'/Stable), in case of need. The latter's rating, in turn, is predicated on similar expectations of support from its parent Industrial and Commercial Bank of China Limited (ICBC; 'A'/Stable).

The ratings are equalised with those of ICBCT to reflect ICBCTL's role as a core subsidiary of its parent bank. This is evident in the name-sharing, full ownership and high board representation by and strong funding support from ICBCT. It is integral to ICBCT's operations via its key role in the auto hire purchase business - which is an important part of the group's retail banking - and through its high revenue and asset contribution to the group. At end-June 2012, ICBCTL's asset size stood at THB37.2bn, representing one third of ICBCT's assets. The company contributed about 36% of ICBCT's net profit and about 46% of its loan portfolio.

Despite its independent legal status, ICBCTL is viewed internally as a division of ICBCT when formulating business strategy and funding requirements. Fitch views ICBCT together with ICBCTL as strategically important to the regional growth ambitions of their ultimate parent, ICBC.

With ICBCTL's rating already at the highest level on the National Rating scale, any downgrade of ICBC's ratings would likely result in a similar rating action for ICBCT and, in turn, ICBCTL. However, Fitch believes this is unlikely in the near term given the Stable Outlook of ICBC's ratings. A material reduction in ICBCT's ownership in or a significant weakening in the propensity of support for ICBCTL may result in negative rating action. Diminished importance to ICBCT through sharply lower contribution to ICBCT's loan portfolio, revenue and profit could lead to ICBCTL's rating being notched down from that of ICBCT.

ICBCTL (formerly Leasing Sinn Asia Company Limited) is a wholly owned subsidiary of ICBCT and has been in the auto hire purchase and leasing business since 2005. It is ICBCT's flagship company for this business in Thailand. The company has expanded its loan portfolios significantly since 2010, when ICBC became the largest shareholder of ICBCT. At end-June 2012, it was ranked number nine in Thailand's hire purchase and financial lease industry with a market share of around 3%.

ICBCT is one of Thailand's small-sized full-licensed banks. It is now 97.7%-owned by ICBC, and this ownership is intended to be a long-term holding. ICBCT has leveraged off ICBC's strong franchise name and increased operational integration with ICBC. ICBCT has aligned its strategy with the parent bank to focus on facilitating bilateral trade between Thailand and China. ICBCT also has strong liquidity support and capital commitment from ICBC, which Fitch considers as key support drivers for the ratings.

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