Fitch Ratings (Thailand) has revised the Outlook on Yuanta Securities (Thailand) Company Limited's (YSTH) National Long-Term Rating to Negative from Stable and has affirmed the rating at 'AA(tha)'.
The Outlook revision is consistent with Fitch's rating action on YSTH's ultimate parent, Taiwan-based Yuanta Financial Holding Co., Ltd. (YFHC; BBB+/Negative), on 22 April 2020. This takes into consideration the relativities within Thailand's National Rating scale.
At the same time, Fitch has withdrawn YSTH's US dollar and Thai baht-denominated upcoming subordinated debenture ratings, as the bonds were cancelled.
The bond ratings were withdrawn as they were cancelled.
KEY RATING DRIVERS
YSTH's ratings are based on our expectation that YSTH would receive extraordinary institutional support from its ultimate parent company. Fitch believes YSTH is a strategically important subsidiary, plays a key role in its group's regional strategy, and exhibits strong synergies with its parent's operation. The parent also has a 99.99% stake in YSTH and exercises a high degree of management control, with evidence of integration and ongoing financial support.
The short-term debenture programme is rated at the entity's National Short-Term Rating, as issuances under the programme will constitute the company's unsubordinated and unsecured obligations.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Fitch could take a positive rating action on YSTH's ratings if the parent were to have a greater ability to provide support, as indicated by a change in the parent's Long-Term Issuer Default Rating or Outlook, while also taking into the consideration YSTH's ratings in relation to the Thai National Scale.
An upgrade could also be possible if Fitch perceives a greater propensity for parental support, for example, if YSTH's role within the group has substantially increased. This may be indicated by YSTH materially ramping up its contribution to the group on a sustained basis and becoming a core part of the group's securities business, contributing 20% of group profit and significantly improving group performance.
The National short-term senior debt rating is already rated at the top end of the scale; therefore, there is no rating upside.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Fitch would downgrade YSTH's National Long-Term Rating if the credit profile of its parent were to deteriorate, as indicated by negative action in the parent's Long-Term IDR.
There may also be downside to the ratings if the parent's propensity to provide extraordinary support were to reduce. For instance, this could occur if the parent significantly reduced its ownership to below 75%, with a significant influence of minority shareholders, or is the financial and management linkage between YSTH and its parent was to weaken. Fitch would also consider YSTH's rating strength relative to Thailand's National Rating scale.
A downgrade on the National Short-Term Rating of YSTH would lead to a downgrade of its short-term senior debt rating.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.
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
YSTH is related to YFHC.
Additional information is available on www.fitchratings.com