OREANDA-NEWS. November 17, 2015. Fitch Ratings has downgraded Standard Chartered Bank (Thai) Public Company Limited's (SCBT) Long-Term Local-Currency Issuer Default Rating (IDR) to 'A' with a Negative Outlook from 'A+' with a Negative Outlook.

At the same time, the agency has affirmed SCBT's Long-Term Foreign-Currency IDR at 'A-' with a Stable Outlook and SCBT's National Long-Term Rating at 'AAA(tha)' with Stable Outlook. A full list of rating actions is included at the end of this commentary.

The rating actions follow Fitch's downgrade of the IDRs on Standard Chartered PLC (SC; SCBT's ultimate parent) to 'A+' with Negative Outlook on 5 November 2015 (see "Fitch Downgrades Standard Chartered to 'A+', Maintains Negative Outlook", at www.fitchratings.com).

KEY RATING DRIVERS

IDRS, NATIONAL RATINGS, SENIOR DEBT AND SUPPORT RATING
SCBT's Long-Term Local-Currency IDR is rated at one notch below SC's Long-Term Foreign-Currency IDR based on parental support as Fitch believes that SCBT is a strategically important subsidiary of SC group. Hence, the recent downgrade of SC's IDRs would directly affect SCBT's Long-Term Local-Currency IDR.

The Negative Outlook on SCBT's Long-Term Local-Currency IDR is consistent with the Negative Outlook on SC's ratings.

However, the downgrade has no impact on SCBT's Foreign-Currency IDR as the rating is currently capped by Thailand's Country Ceiling of 'A-'. The Support Rating has been affirmed as Fitch still believes that there is an extremely high probability of extraordinary support from SC group, if needed.

SCBT's National Ratings and senior debt ratings have been affirmed as its credit profile, as reflected in the Long-Term Local-Currency IDR of 'A', remains stronger than Thailand's sovereign rating of 'A-'.

Fitch considers SCBT a strategically important subsidiary of SC group, based on SC group's 99.87% ownership of the Thai subsidiary (via Standard Chartered Bank), a strong level of integration between the two entities and a history of ordinary support from the parent to the subsidiary. SCBT is a long-term holding for SC group and has an important role in supporting the group's international banking business and expansion in the Greater Mekong region.

VIABILITY RATINGS
SCBT's VR reflects the bank's strong financial buffers, in term of capitalisation and reserve coverage ratio, which should provide adequate cushion against asset-quality deterioration.

The VR also incorporates Fitch's view that profitability could remain weak over the next one to two years due to persistent provisioning risks and pressure on interest income from slow loan growth.

RATING SENSITIVITIES

IDRS, NATIONAL RATINGS SENIOR DEBT AND SUPPORT RATING
A change in SC's IDRs would lead to similar rating action on SCBT's Long-Term Local-Currency IDR, but would be unlikely to affect the latter's Long-Term Foreign-Currency IDR, which is currently capped by Thailand's Country Ceiling of 'A-'.

SCBT's National Ratings are the highest on Thailand's National Rating scale; hence, there is no upside. A downgrade of SCBT's National Ratings and senior debt rating could occur if SCBT's credit profile were to deteriorate such that its Long-Term Local-Currency IDR falls below Thailand's Long-Term Local-Currency IDR of 'A-'.

A reduction in SC group's propensity to support SCBT, which might be seen, for example, in a material reduction in its shareholding, could result in negative rating action. However, Fitch believes this is unlikely to occur in the near term. A change in Thailand's Country Ceiling could have a similar effect on SCBT's Long-Term Foreign-Currency IDR.

VIABILTIY RATING
The VR is unlikely to be upgraded over the medium term unless SCBT significantly strengthens its local franchise. Negative rating action on the VR could result if there is a substantial deterioration in asset quality that leads to significant decreases in profitability and capitalisation.

The rating actions are as follows:

- Long-Term Foreign-Currency IDR affirmed at 'A-'; Outlook Stable
- Short-Term Foreign-Currency IDR affirmed at 'F2'
- Long-Term Local-Currency IDR downgraded to 'A' from 'A+'; Outlook Negative
- Short-Term Local-Currency IDR affirmed at 'F1'
- Viability Rating affirmed at 'bbb'
- Support Rating affirmed at '1'
- National Long-Term Rating affirmed at 'AAA(tha)'; Outlook Stable
- National Short-Term Rating affirmed at 'F1+(tha)'
- National Rating on short-term unsecured and unsubordinated debenture programme affirmed at 'F1+(tha)'