Fitch Rates Bank of Ayudhya's Basel III Tier 2 THB Notes at 'AA(tha)'

KEY RATING DRIVERS
The Basel III Tier 2 notes are rated two notches below the issuer's National Long-Term Rating, to reflect their higher loss-severity risk relative to senior unsecured instruments arising from their subordinated status.

The notes do not incorporate going concern loss absorption, and hence there is no additional notching for non-performance risk. Terms and conditions include a non-viability trigger, which is defined in accordance with local standards as emergency capital assistance from the central bank or any other empowered government agency.

BAY's National Long-Term Rating is driven by shareholder support from its Japan-based parent, MUFG Bank, Ltd. (A-/Stable). MUFG owns 76.9% of BAY, and the Thai entity plays a strategically important role in the group's operations in southeast Asia.

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

There is no upside to BAY's Thai-baht Tier 2 subordinated debt instruments because the anchor rating, BAY's National Long-Term Rating, is at the top end of the scale.

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

A downgrade of the bank's National Long-Term Rating would lead to a downgrade of the Tier 2 notes.

BAY's National Long-Term Rating could be negatively affected by a weakening in MUFG's ability or propensity to support BAY. For example, this may be indicated by negative rating action on MUFG's Long-Term Issuer Default Rating (IDR), which would most likely lead to similar action on BAY's National Long-Term Rating.

For further details of BAY's key rating drivers and sensitivities, please refer to Fitch Affirms Bank of Ayudhya at 'BBB+'; Outlook Stable.

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

DATE OF RELEVANT COMMITTEE
25 March 2021

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
The IDRs, Support Rating and National Ratings of BAY are linked to the credit profile of MUFG.

• ข่าวBank of Ayudhya
• ข่าวFitch Ratings
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