Fitch Ratings (Thailand) has revised the Outlook on Citicorp Leasing (Thailand) Limited's (CLT) National Long-Term Rating to Stable, from Negative, and has affirmed the rating at 'AAA(tha)'.

Fitch has also affirmed the National Short-Term Rating at 'F1+(tha)' and senior debt rating at 'AAA(tha)'.

The Outlook revision follows Singapore-based United Overseas Bank Limited's (UOB; AA-/Negative) announcement that it will acquire US-based Citibank, N.A.'s (A+/Stable/a) consumer business in Indonesia, Malaysia, Thailand and Vietnam. We expect the deal to shrink downside risks to CLT's rating due to the new potential parent's ability and propensity to provide support to CLT.

Key Rating Drivers

CLT's ratings are driven by shareholder support from Citibank, N.A. CLT is highly integrated with Citibank, N.A.'s Bangkok branch consumer business and has a profitable performance record. The agreement between UOB and Citibank, N.A. will lead to CLT being acquired by United Overseas Bank (Thai) Public Company Limited (UOBT; A-/Stable) after the transaction is completed in 2H22. The Outlook revision to Stable reflects our opinion that the transaction will proceed as planned, and that shareholder support prospects from UOBT are unlikely to be weaker than that from Citibank, N.A.

CLT will become a subsidiary of UOBT with full ownership and control by the parent once the transaction completes. We expect CLT to have an important role in supporting UOBT's retail banking business, based on the leasing company's profitable personal loan business. We believe the UOB group will have the ability and propensity to provide extraordinary funding support to CLT through UOBT after the acquisition, if needed. CLT's asset size of only 3% compared with UOBT's assets prior to the acquisition should not be material for UOBT if support were required.

We expect support prospects from Citibank, N.A. to CLT to remain unchanged prior to the acquisition due to the full shareholding and brand-sharing from the US-based bank.

CLT's National Long-Term Rating also reflects our belief that, after considering support prospects, the company's credit profile is in line with the best credits in the country.

CLT's senior debt ratings are at the same level as its National Long-Term Rating, reflecting the unsubordinated and unsecured nature of the obligations.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

There is no upside to CLT's rating, as it is at the highest level on the national ratings scale.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Prior to the completion of the deal, a reduction in Citibank, N.A.'s ability to support CLT could result in a downgrade of the company's ratings. This would be indicated by a downgrade in the parent's Viability Rating and our assessment of how this impacts support prospects for CLT relative to the Thai national rating scale.

Any substantial changes to the acquisition plan by UOB group may lead to a re-assessment of support prospects and potentially lead to ratings downside. However, this is not our base case scenario.

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond 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

CLT's ratings are linked to the Viability Rating of Citibank, N.A., along with our assessment of the company's relative strength on the Thai national ratings scale.

RATING ACTIONS

Entity / Debt

Rating

Prior

Citicorp Leasing (Thailand) Limited

Natl LT

AAA(tha)

Affirmed

AAA(tha)

Natl ST

F1+(tha)

Affirmed

F1+(tha)

senior unsecured

Natl LT

AAA(tha)

Affirmed

AAA(tha)

Page

of 1

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

(C) 2022 Electronic News Publishing, source ENP Newswire