KUALA LUMPUR (Sept 7): CIMB Thai Bank PCL’s rights issue to raise THB3.7 billion (about RM443 million ) is deemed 'credit positive' for the group, according to bond rating agency Moody’s Investors Service.

In a note today, Moody's said the rights issue, which was scheduled to take place this October, would increase CIMB Thai's common equity tier 1 (CET 1) ratio to 10.7%, from 9.1%. Moody's said the exercise would place CIMB Thai closer to Thailand's banking sector average CET 1 ratio of 13.1%.

"The capital raise is credit positive for CIMB Thai, because it will strengthen its loss-absorption buffer to withstand slower economic growth, rising asset quality pressures and elevated credit costs affecting Thai banks.

"Compared with other Thai banks [that] we rate, CIMB Thai has weaker loss-absorption capacity, owing to its weaker capitalization and poorer asset quality. CIMB Thai’s gross nonperforming loans ratio deteriorated to 4.1% as of 30 June 2015, from 3.3% at year-end 2014, exceeding the Thai banking system’s average of 2.4% at 30 June 2015," Moody's said.

Malaysia-based CIMB Group Holdings Bhd via CIMB Bank Bhd, owns 93.7% of CIMB Thai.

Moody’s said the capital injection from CIMB Bank to CIMB Thai was expected to lower CIMB Bank's CET 1 ratio by some 10 basis points.

"However, this will not impact the consolidated capital ratio of the banking group. As at June 30, CIMB Group Holdings Bhd['s] total capital ratio stood at 13.9%, while its CET 1 capital ratio was at 9.7%," Moody's said.

At 12:30pm, CIMB Group's shares fell four sen or 0.8% to settle at RM4.71, for a market capitalisation of RM39.99 billion.

The stock saw some three million shares done.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)