"Fitch's rating decisions come as the four major Thai auto financiers face a further weakening in their operating environment in 2007, which could see some operators vulnerable to rising pressures on asset quality and profitability," Fitch said in a statement.

The rating agency said receivables growth was expected to fall significantly, which - together with rising funding costs, operating expenses and competition on lending rates - will keep margins narrow.

Furthermore, following several years of aggressive growth and competition that led to a significant relaxation of origination standards on down payments, credit costs (ie, debt provisioning) are expected to rise, Fitch said.

At the same time, the agency also affirmed the ratings of the other large, mainly auto financiers.

Thanachart Capital and Thanachart Bank have been the most aggressive, having established their dominant market position over the course of six years, with average annual growth of 30.4 per cent compared with Tisco Bank's 18.4 per cent.

However, profitability appears the weakest, due primarily to aggressive pricing, rising funding costs as well as costs incurred from its large branch network expansion, Fitch said.

The revisions of the rating outlooks for Thanachart Capital and Thanachart Bank reflect Fitch's concerns about deteriorating profitability, weakening capital position and vulnerability to rising delinquencies and credit costs stemming from the group's high-growth strategy.

Meanwhile, Fitch affirmed Kiatnakin Bank's ratings as "negative", to reflect its vulnerability to further asset-quality pressures, due to its large loan exposure to small-and medium-sized property developers - which account for about a third of the bank's loan book - and the weakening operating environment.

However, these risks are partly mitigated by its wider margins and strong capital position, Fitch said.

The agency's ratings for Tisco take into account the bank's strong profitability, asset quality and capital, as well as a more conservative track record.

Tisco's ratings outlook remains "stable", given that profitability and asset quality is expected to be maintained despite the weakening operating environment.

Nonetheless, a substantial reduction in its capital ratio could put downward pressure on the bank's ratings in the medium term, Fitch said.