Moody's Investors Service has revised the outlook for 10 Thai banks to stable from positive, with asset quality and profitability poised to weaken because of the coronavirus crisis.
But the international rating agency affirmed the banks' long-term deposit ratings and their long-term senior unsecured debt ratings and issuer ratings.
"Moody's expects that the operating environment for the Thai banks will deteriorate in the next 12-18 months due to disruptions from the coronavirus outbreak, and this will lead to a weakening of banks' asset quality and profitability," it said.
The 10 affected banks are Bangkok Bank, Bank of Ayudhya, CIMB Thai Bank (CIMBT), Export-Import Bank of Thailand, GHB Bank, Kasikornbank, Krungthai Bank, Siam Commercial Bank, TMB Bank and United Overseas Bank Thai.
The rapid and widening spread of the coronavirus, deteriorating global economic outlook, volatile oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets.
The Thai banking system has been one of the sectors affected by the shock, particularly given the role that tourism plays in Thailand's economy, Moody's said.
Thailand's sovereign credit strength is a key input in Moody's ratings for Thai banks, because the country's credit strength affects Moody's assessment of the government's capacity to provide support to the banks in times of stress.
"The change of sovereign outlook to stable from positive means that the upside for long-term bank deposit and senior debt/issuer ratings is now eliminated, leading Moody's to revise the outlooks on the 10 Thai banks to stable," Moody's said.
"Yet banks' strong capital and liquidity, as well as government support to the broader economy, will provide a buffer against growing risks."
Most SET-listed commercial banks in the first quarter remained resilient amid the floundering economy, while building higher provisions for expected loan losses from rising bad debt as new financial reporting standards are adopted and the coronavirus spreads.
Banks' first-quarter results were better than expected because they had yet to see the full impact of the outbreak, while non-performing loans did not reflect the real state of the economy, due to the government's relief package, said Finansia Syrus Securities.
The long-term bank deposit and senior unsecured debt/issuer ratings of nine Thai banks, except CIMBT, are already at Baa1, meaning that these ratings are unlikely to be upgraded unless the sovereign rating is upgraded, Moody's said.
A rating downgrade is possible for all 10 banks if their stand-alone creditworthiness deteriorates significantly or the sovereign rating is downgraded.