Fitch IBCA Ratings - Press Releases -

Fitch

Established in 1913

THAI BANKS DOWNGRADED
18 December 1997

London/Brisbane: Fitch IBCA, the international rating agency, has downgraded the Individual ratings of the ten Thai banks it rates, after undertaking a detailed analysis of the banks' third quarter accounts. The Legal ratings for all of the banks are unchanged. The ratings are as follows:

Bangkok Bank: Individual rating from C to D; Legal rating of 2.
Krung Thai: Individual rating from C/D to D/E; Legal rating of 2.
Thai Farmers: Individual rating from C to D; Legal rating of 2.
Siam Commercial: Individual rating from C to D; Legal rating of 2.
Bank of Ayudhya: Individual rating from C/D to D; Legal rating of 2.
Thai Military: Individual rating from D to D/E; Legal rating of 2.
First Bangkok City: Individual rating from D/E to E; Legal rating of 4.
Siam City: Individual rating from D/E to E; Legal rating of 4.
Bank of Asia: Individual rating from D to D/E; Legal rating of 4.
Thai Danu: Individual rating from D to D/E; Legal rating of 4.

Fitch IBCA said that the third quarter accounts indicated a significant deterioration in loan quality. In some instances, the increase in accrued interest over the quarter amounted to over 30% of interest recognised as income, implying that 30% of "performing" loans were not paying interest.

Using the third quarter results, Fitch IBCA calculated a "loss absorption capacity" ratio - a measure of free capital, after deducting expected losses.

On this basis, three banks in particular - First Bangkok City Bank, Siam City Bank and Bangkok Metropolitan Bank - appear to have extremely low capacity to absorb losses. Laem Thong appeared the weakest bank in September, but has improved its capital position following a subsequent substantial equity injection.

According to Fitch IBCA's analysis, Bangkok Bank and Thai Farmers Bank remain the strongest banks in Thailand.

The results are summarised in the table below.

Fitch IBCA's Individual ratings are an evaluation of banks' financial strength determined on the premise that they are entirely independent and therefore unable to rely on the support of state authorities or owners.

A "D" Individual rating is assigned to a bank "which is currently underperforming in some notable manner. Its financial condition is likely to be below average and its profitability poor.

The bank has the capability of recovering using its own resources, but this is likely to take some time. An "E" rating is assigned to a bank "with very serious problems which either requires or is likely to require external support."

Bank	Loss Absorption Capacity (%)
Bangkok Bank	9.1
Krung Thai Bank	3.6
Thai Farmers Bank	8.1
Siam Commercial Bank	3.5
Bank of Ayudhya	4.6
Thai Military Bank	4.6
First Bangkok City Bank	1.4
Siam City Bank	0.5
Bangkok Metropolitan Bank	0.3
Bank of Asia	2.8
Thai Danu	5.9
Union Bank of Bangkok	2.6
Nakornthon Bank	3.9
Laem Thong	-3.0

Notes:
1) Since September, Laem Thong has increased its equity by 75%, which raises its "loss absorption capacity" to about 5%.
2) "Loss absorption capacity" is Fitch IBCA's estimate of the banks' current level of capital plus reserves less expected loss, as a percentage of loans.

Full copies of the report are available on request from Bosco Dias in London on +44 (0)171 417 4222.

Contact:
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