# Moody’s Ratings affirms EXIM Bank of Thailand’s Baa1 ratings with outlook remaining stable

- Link: https://www.thailand-business-news.com/banking/174747-moodys-ratings-affirms-exim-bank-of-thailands-baa1-ratings-with-outlook-remaining-stable
- Published: 2024-11-13T10:09:00+07:00
- Author: Daniel Lorenzzo

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.

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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](https://ratings.moodys.com/rmc-documents/409852).
Alternatively, please see the Rating Methodologies page on [https://ratings.moodys.com](https://ratings.moodys.com/)
for a copy of this methodology.

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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](https://ratings.moodys.com/rating-definitions).

For any affected securities or rated entities receiving direct credit support/credit
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For ratings issued on a program, series, category/class of debt or security, certain
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These ratings are solicited. Please refer to Moody’s Policy for Designating and 
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