Fitch Rates THB Notes Issued by SMBC's Bangkok Branch 'AAA(tha)'
SMBC's Bangkok Branch is one of the largest foreign-bank branches in Thailand, with total assets of THB336bn as of end-June 2016.
KEY RATING DRIVERS
The National Rating on the notes is based on SMBC's Long-Term Foreign-Currency Issuer Default Rating (IDR) of 'A', which is above Thailand's Long-Term Local-Currency IDR of 'BBB+' and hence corresponds to 'AAA(tha)', the highest rating on Thailand's National Rating scale.
SMBC's IDR is based on the banking group's Viability Rating (VR) of 'A', which reflects its strong domestic franchise in Japan, solid liquidity profile in yen, sound asset quality and adequate capital position. SMBC is one of the subsidiaries of Sumitomo Mitsui Financial Group, Inc (SMFG), which is the third-largest financial group in Japan by total assets. The Negative Outlook on SMBC's IDR is driven by the Negative Outlook at the Japanese sovereign; please see "Fitch Revises Outlook for Japanese Financial Institutions to Negative" dated 16 June 2016.
RATING SENSITIVITIES
The 'AAA(tha)' rating on SMBC's senior notes is already the highest on the national scale, limiting the possibility of a rating upgrade.
A downgrade could be triggered if SMBC's Long-Term Foreign-Currency IDR were to be lower than Thailand's Long-Term Local-Currency IDR, either by a downgrade of SMBC itself or an upgrade of Thailand above SMBC. However, both scenarios are unlikely in the near term given the current two-notch gap between SMBC and Thailand.
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