Fitch Ratings has today affirmed United Overseas Bank (Thai) Public Company Limited's (UOBT; formerly Bank of Asia) Long-term foreign currency Issuer Default Rating (IDR) at 'BBB+', Short-term foreign currency IDR at 'F2', National Long-term rating at 'AA+(tha)', National Short-term rating at 'F1+(tha)', Individual rating at 'C' and Support rating at '2'. The Outlook is Stable.
The ratings are based on UOBT's strong financial position and support from controlling shareholder, United Overseas Bank of Singapore (UOB, 'AA-'/Stable). Any change in the shareholding of UOB in UOBT, or UOB's commitment and support to UOBT could affect its International and National ratings. Meanwhile, any changes in Thailand's Country Ceiling could also affect UOBT as this currently constrains UOBT's foreign currency ratings. The bank's performance remains constrained by its small size and weaker franchise, compared to Thailand's major banks.
UOBT's 2008 performance improved with a reported net profit of THB 1.4bn, compared to a net loss of THB92m in 2007, due to significantly lower loan loss provisions (LLP), improved loan yield and lower funding cost. However, profitability measures remain weaker than major banks due to its weaker loan and deposit franchise. H109 performance has been relatively weak with a net profit of THB394m (a decline of 57% yoy) due to continuing loan contraction and higher provisioning cost.
UOBT's asset quality improved following the sale of THB11bn worth of NPL in Q207, with NPLs falling sharply to THB7.9bn at end-2008 (about 5% of total from 12% at end-2006). However, impaired loans rose to THB8.7bn (6% of total) at end-June 2009 and provisioning risk remains, due to Thailand's continual weak economic environment. Loan loss reserves (LLR) amounted to about THB6bn at end-June 2009, or 69% of impaired loans.
Funding and liquidity position has remained stable. Deposits account for about 90% of funding at end-June 2009, and about 70% of deposits have maturities of less than six months. Loan-to-deposit ratio remains above 90%, while liquid assets to deposits and short-term funding ratios were about 31% at end-June 2009, a rise from 23% at end-2008.
UOBT's capital is the strongest among Thai commercial banks. The bank has recently completed a THB2.2bn capital increase which resulted in Tier 1 capital ratio rising to 20.37% to support future business expansion, and minimise potential ownership dilution in the longer term due to foreign ownership restrictions.
UOBT was established in 1939 as Bank of Asia and was later acquired by Singapore's UOB in 2004. UOBT is Thailand's ninth-largest commercial bank, with 147 branches and 2% of Thailand's total system loans and deposits. The bank's core strength is in SME and retail lending. UOB currently holds 99.66% stake in UOBT.
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