Singapore, November 12, 2024 — Moody’s Ratings (Moody’s) has today affirmed Export-Import Bank of Thailand’s (EXIMT) Baa1 foreign currency (FC) long-term (LT) issuer and FC senior unsecured ratings, as well as the bank’s ba3 Baseline Credit Assessment (BCA) and adjusted BCA.
At the same time, we have affirmed EXIMT’s (P)Baa1 FC senior unsecured medium-term note program, Baa1 LT FC and local currency (LC) Counterparty Risk Ratings (CRRs), Baa1(cr) LT Counterparty Risk (CR) Assessment, P-2 short-term (ST) FC and LC CRR, and P-2(cr) ST CR Assessment.
We have maintained the stable outlook on the ratings, where applicable.
Rationale for Ratings
The affirmation of EXIMT’s ratings is driven by our expectation that the bank’s adequate capitalization, strong access to funding and large credit reserves relative to its gross loans will mitigate the risks from its weak asset quality and below peer average profitability. The affirmation also reflects our expectation that EXIMT will continue to benefit from support from the Government of Thailand (Baa1 stable), due to the bank’s policy role and government ownership.
We continue to classify EXIMT as a government-backed institution, based on its policy role in supporting Thai foreign trade and investments, and its full ownership by the Government of Thailand. The government regularly injects new capital into EXIMT. As a result, the bank’s Baa1 ratings benefit from five notches of uplift from its ba3 BCA.
Structurally, EXIMT faces elevated asset quality risk from very high single-client concentration in loans, exposure to small and medium-sized enterprises, and exposures in emerging and frontier markets. Moreover, the bank’s very large and rapidly growing off-balance sheet exposures, which include guarantees and other commitments, will continue to present credit risks. EXIMT’s asset quality weakened in the first half of 2024, with its gross nonperforming loans (NPL) ratio increasing to 5.1% as of 30 June 2024 from 3.6% a year earlier, driven by delinquencies from its corporate exposures. While we expect further weakening in asset quality, the bank’s high provision coverage of 195% of NPLs as of 30 June 2024 provides some buffer against credit risk.
EXIMT’s profitability declined in the first half of 2024 with annualized net income/tangible assets of -0.4% compared to 0.3% in 2023 due to high credit costs amid higher NPLs. The bank’s profitability is prone to volatility as it is vulnerable to sudden spikes in credit costs due to its concentrated loan book. Moody’s expects the bank’s profitability to remain below the average of rated peers in Thailand over the next 12 – 18 months.
EXIMT’s capitalization weakened because of the net loss in the first half of 2024, with its tangible common equity (TCE) as a percentage of its risk weighted assets (RWA) declining to 11% as of 30 June 2024 from 12% a year earlier. While the bank’s capitalization will be weighed down over the medium term by weaker internal capital generation and a pickup in growth in risk weighted assets, we expect EXIMT’s capitalization to be supported through capital injections from the government.
EXIMT is highly reliant on market funding, with its market funds as a percentage of tangible banking assets at 52% as of 30 June 2024. Nonetheless, its refinancing risk is partially tempered by its policy role and strong linkages to the government. Although the bank’s liquid assets made up only 13% of its tangible banking assets as of 30 June 2024, we consider this small liquidity buffer in the context of the bank’s sticky deposit base, which fully comprises state-owned entities.
Factors Influencing the Upgrade or Downgrade of Credit Ratings
An upgrade of EXIMT’s long-term ratings is unlikely because they are already at the same level as the Government of Thailand’s sovereign rating. However, we could upgrade EXIMT’s BCA if the bank improves its solvency metrics, with its problem loan ratio decreasing below 3%, its tangible common equity (TCE) as a percentage of its risk weighted assets (RWA) strengthening above 14% and its net income/tangible assets improving to above 1%. An improvement in its funding and liquidity will also be positive for the BCA.
EXIMT’s ratings will be downgraded if the Government of Thailand’s sovereign rating is downgraded, as a result of the lower capacity of the sovereign to provide support to the bank.
Downward pressure on the bank’s BCA and ratings would develop if asset quality deteriorates; leading to a sustained weakening of capital and profitability, where its TCE/RWA ratio falls below 10.5% and net income/tangible assets decreases to less than 0.5%. A significant deterioration in the bank’s access to funding and liquidity would also be negative for the BCA.
The principal methodology used in these ratings was Banks Methodology published in March 2024 and available at https://ratings.moodys.com/rmc-documents/409852. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Export-Import Bank of Thailand (EXIMT) is headquartered in Bangkok. It reported total assets of THB185 billion as of 30 June 2024.
Regulatory Disclosures
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
For any affected securities or rated entities receiving direct credit support/credit substitution from another entity or entities subject to a credit rating action (the supporting entity), and whose ratings may change as a result of a credit rating action as to the supporting entity, the associated regulatory disclosures will relate to the supporting entity. Exceptions to this approach may be applicable in certain jurisdictions.
For ratings issued on a program, series, category/class of debt or security, certain regulatory disclosures applicable to each rating of a subsequently issued bond or note of the same series, category/class of debt, or security, or pursuant to a program for which the ratings are derived exclusively from existing ratings, in accordance with Moody’s rating practices, can be found in the most recent Credit Rating Announcement related to the same class of Credit Rating.
For provisional ratings, the Credit Rating Announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating.
Moody’s does not always publish a separate Credit Rating Announcement for each Credit Rating assigned in the Anticipated Ratings Process or Subsequent Ratings Process.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
The Global Scale Credit Rating(s) discussed in this Credit Rating Announcement was(were) issued by one of Moody’s affiliates outside the EU and UK and is(are) endorsed for use in the EU and UK in accordance with the EU and UK CRA Regulation.
Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
'/%3E%3C/svg%3E){kind=small}
