OREANDA-NEWS. Fitch Ratings expects foreign banks to continue to expand their presence in Thailand's commercial banking sector, with the bulk of the contribution coming from banks in the Asia-Pacific region.

The market position of foreign banks in Thailand has already grown sharply in recent years, in large part due to the acquisition of Thailand's fifth-largest commercial bank, Bank of Ayudhya, by the Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU; A/Stable) in December 2013. Foreign banks accounted for 22.2% of total lending in the sector as of end-2014, up from 12.5% in 2009.

Foreign banks' participation in Thailand has shifted towards Asian banks, and away from European and US banks. This trend is likely to continue, in line with the greater regionalisation of trade and investment flows. More liberalisation initiatives planned by the Bank of Thailand (the central bank) appear to be focused on links within the Association of Southeast Asian Nations, which would offer more opportunities for regional banks to operate in the country.

The six foreign banks rated by Fitch in Thailand have ratings that are driven by institutional support. We see a high probability that their parent institutions would give them extraordinary support, if needed. Fitch classifies all six banks as being strategically important subsidiaries to their parents due to majority ownership, management and operational integration, and a track record of providing support.

All the rated entities have Thai National Ratings in the 'AA(tha)' to 'AAA(tha)' range. The ratings show the positive long-term credit trend in the banking sector since the 1997 crisis, as many smaller Thai banks have moved to being subsidiaries of strong international or regional banking groups from being family-controlled entities.

The accompanying special report "Thailand's Foreign Banks: Peer Review - Asia Banks Gain on European, US Counterparts in Thai Expansion Bid" is available at www.fitchratings.com or by clicking the link in this media release.