Siam Commercial Bank's (SCB) reorganisation reflects the industry's rising complexity.
The group restructuring announced by SCB on Sept 22 is in line with the trend for Thai banks to become more complex financial groups, Fitch Ratings says.
SCB plans to set up a holding company that will own the group's operating entities, including SCB.
It aims for the transaction to be completed in the second quarter of 2022 once necessary approvals are obtained.
Fitch does not expect the restructuring to affect SCB's ratings.
The Thai banking sector is facing a prolonged low-growth and low interest-rate environment that inhibits growth opportunities in traditional banking segments, leading to several transformative mergers and acquisitions in the last two years.
SCB's planned reorganisation is taking place amid greater investment in fintech via standalone units and in partnership with key non-bank players.
"We believe the proposed restructuring will improve the central bank's ability to regulate SCB, as non-traditional and non-financial subsidiaries will be transferred to the holding company."
This group format may be replicated at other large financial institutions as their organisational structures become more complex.
"We expect more details to emerge on capital planning for the holding company, SCB and the other subsidiaries. There is to be a one-off 70 billion baht dividend from SCB to the holding company for business and asset transfers and new investment."
A large drop in SCB's common equity Tier 1 ratio, which stood at 16.8% in the first half of 2021, could lead Fitch to reassess the bank's capitalisation score and standalone credit profile.
"We will also assess the group's overall risk appetite, and whether there could be any effect on the bank," the credit-rating agency said.
"Nevertheless, SCB's long-term issuer default rating is also driven by its support rating floor of BBB, which reflects potential sovereign support arising from SCB's systemic importance and which we do not believe will be affected by the proposed transaction."
