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Moody's affirms CIMB ratings on acquisition of BankThai stake

Stocks and Financial Services Press Releases วันพุธที่ ๒๕ มิถุนายน พ.ศ. ๒๕๕๑ ๐๒:๑๔ น.
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Moody's Investors Service has affirmed CIMB Berhad's (CIMB Bank) ratings following CIMB Group Sdn Bhd's agreement to acquire a 42.13% stake in BankThai Public Company Ltd.

CIMB Group may ask CIMB Bank -- of which it is the immediate holding company -- to acquire the interest from the Financial Institutions Development Fund of Thailand for a cash consideration of THB 5.9 billion (RM 577 million).

The affirmation applies to CIMB Bank's A3/P-1 deposit ratings, Baa1 subordinated debt rating and D+ bank financial strength rating (BFSR). The Baa3 rating on the backed-preference stock issued by its subsidiary SBB Capital Corporation is also affirmed.

The outlook on all ratings is stable.
"CIMB Bank's financial profile would be negatively affected by the transaction, but not sufficiently to warrant a ratings change," says Christine Kuo, a Moody's VP/Senior Analyst.

"The major financial impact would be a reduction in CIMB Bank's capital ratios, while its other key financial metrics -- such as earnings and asset quality -- would not be significantly affected due to BankThai's relative small size," adds Kuo. "However, if CIMB Bank continues to make acquisitions, the increase in its risk profile and additional stress on its balance sheet and management resources could trigger a ratings review."

CIMB Bank reported a total capital adequacy ratio (CAR) of 13.9% and tier 1 CAR of 9.2% as of end-March 2008.

While the size of the transaction is still uncertain, the bank expects to raise a combination of tier-1 and tier-2 capital before it is completed in order to keep its total and tier 1 CARs around its target levels of 12% and 8%, respectively.

CIMB Bank may also launch a mandatory general offer for the remaining shares. Assuming full acceptance, the total costs for the transaction could rise to approximately RM 1.9 billion, including a RM 500-600 million recapitalization of BankThai.

From a franchise perspective, CIMB Bank would benefit from earnings and risk diversification over the long term, although considerable efforts and resources would be required to restructure BankThai. At present, CIMB Bank has no presence in Thailand.

The transaction is subject to approvals from the Ministry of Finance of Thailand, Ministry of Commerce of Thailand, and Bank Negara Malaysia. Barring any unforeseen circumstances, it is expected to be completed in 4Q2008.

BankThai is the 9th largest commercial bank in Thailand in terms of assets with 147 branches. It was established in August 1998 following the consolidation of 14 financial institutions in the aftermath of the Asian financial crisis in 1997. As at March 31, 2008, its total assets were THB 216.3 billion (RM 21.2 billion) and equity was THB 4.8 billion (RM 470

million).
Headquartered in Kuala Lumpur, Malaysia, CIMB Bank is the 3rd largest commercial bank in the country with a consolidated assets of RM 159.4 billion (US$50 billion) as at March 31, 2008.
--www.theasianbanker.com (June 25 2008)--

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