Fitch Assigns CardX First-Time National Rating of 'AA(tha)'; Outlook Stable

KEY RATING DRIVERS
High Chance of Shareholder Support: The ratings are based on Fitch's expectation of a high probability that CardX's parent, SCB X Public Company Limited (SCBX; AA+(tha)/Stable), would provide extraordinary support to the subsidiary, if needed. Fitch rates CardX using the shareholder support framework, underpinned by the strength of SCBX's intrinsic credit profile. The Stable Outlook is consistent with the Outlook on SCBX.

Strategically Important Subsidiary: Fitch believes CardX is a strategically important subsidiary of SCBX. This is based on the subsidiary's integrated and synergistic role within the group as well as close control by and significant financial support from the parent. CardX's ratings also reflect the company's credit profile relative to other entities on the Thai national rating scale.

Important Role in Group: Fitch believes CardX plays a strategic role as a key consumer-finance arm of SCBX group. We expect the business to maintain strong synergies with SCBX and the group's banking entity, The Siam Commercial Bank Public Company Limited (SCB, AA+(tha)/Stable). CardX was established in 2021 as part of a group restructuring. It manages the portfolio of credit cards issued by SCB and offers other personal loan products to the bank's retail clients. CardX completed the acquisition of SCB's credit card and personal loan portfolio of THB102 billion in December 2022.

Modest Contribution to Group: CardX is SCBX's largest non-bank subsidiary by asset size and we expect consumer finance to remain one of the group's key growth drivers. Nonetheless, the company's contribution remains small relative to the group's consolidated performance and balance sheet. It accounted for less than 4% of the parent's consolidated assets at end-2022.

Close Control and Integration: CardX is a wholly owned subsidiary of SCBX and its board and key executives are appointed by the parent. Moreover, the company derives a significant proportion of its funding from SCBX group, and we expect this to remain the case even as it sources more funding externally over the next few years. CardX's strategy, funding and liquidity and risk-management policies and procedures are closely aligned with, and monitored by, SCBX. As part of SCBX, CardX is also under the Bank of Thailand's supervision.

RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Any weakening in SCBX's intrinsic credit profile, as indicated by the parent's National Long-Term Rating, may lead to negative rating action on CardX. Any action would also take into account relativities within Thailand's national rating universe.

A perceived decline in SCBX's propensity to support CardX could also lead to a downgrade of the subsidiary's ratings. This may arise from a reduction in SCBX's shareholding to below 50%, along with diminished management control and integration between the entities, or if the parent group starts to reduce business linkages and cooperation with the subsidiary, including backup funding facilities provided to CardX.

Moreover, the parent's commitment to support its subsidiary may be tested if CardX undertakes any major expansion into new businesses that are less synergistic with the rest of the group. This will place downward pressure on the support-driven rating and could lead to negative rating action on CardX. However, Fitch does not expect any near-term changes in support propensity.

Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade of SCBX's National Long-Term Rating could indicate a stronger support ability and lead to rating upside for CardX, although Fitch would also take into account the group's positioning within Thailand's national rating universe at the time.

Any perceived strengthening in SCBX's propensity to support CardX could also lead to positive rating action. This may occur if CardX starts to play a significantly larger role in supporting SCBX's strategy and consolidated franchise.

However, this is unlikely to occur in the near term, as any material and sustained increase in CardX's group contribution would likely require greater time and effort.

There is no upside to the National Short-Term Rating, as it is already at the highest point on the scale.

DATE OF RELEVANT COMMITTEE
16 March 2023

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
CardX's ratings are linked to the local-currency credit profile of SCBX, as indicated by its National Long-Term Rating.

Additional information is available on www.fitchratings.com