Fitch affirms National Finance

Fitch Ratings Thailand said it affirmed National Finance PCL's A-(tha) national long-term rating, F2(tha) national short-term rating and 5 support rating. The agency also affirmed banking subsidiary Thanachart Bank's A-(tha) national long-term rating, F2(tha) national short-term rating, D individual rating and 5 support rating. The outlook is stable.

In 2005, National Finance transferred its finance businesses to the bank, including some assets and liabilities excluding its investments, existing hire purchase receivables and debentures. In 2005, revenue from the company's operations still accounted for more than half of the group's total revenue, while that of the bank made up just about 35%. However, Fitch predicted that the bank's contribution to group revenues will rise to more than 50% in 2006.

Fitch said the ratings reflect National Finance's strong capital, consumer finance niche and broad-based financial services business.

The main risk to its performance is a high level of restructured loans, aggressive lending growth at the subsidiary level and rising interest rates that could weaken the group's funding costs, asset quality and profitability, the agency said. While a group restructuring should produce a larger and more financially sound financial conglomerate, Fitch said the transfer of National Finance's hire purchase business to Thanachart Bank will see National Finance's reliance on dividends from the bank increase in the medium-term, as it is transformed into a holding company.

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