[PHNOM PENH POST]
MOODY’S Investors Service yesterday announced a change in outlook for
Cambodian Public Bank to “negative” from “stable”, citing increasing
risks in the Kingdom’s banking system and exposure to slowdowns in
Western markets.
While CamPu Bank country head Phan Ying Tong
said yesterday the company’s financial position remained strong, one
Moody’s analyst reckoned a credit-rating downgrade was likely to follow
over the next year and a half.
The change in outlook comes as
Cambodia’s financial sector is increasingly at risk from rapid credit
growth, Christine Kuo, a Moody’s senior credit officer, said in a report
on Monday. Credit in Cambodia’s banking system increased to $3.24
billion in 2010 from $604 million in 2005, according to the report.
Kuo
also cited continued exposure to the struggling United States and
European Union economies as a reason for changing the outlook on Campu
Bank’s D-grade bank financial strength rating to “negative”, she said.
Moody’s
describes D-grade institutions as displaying “modest intrinsic
financial strength, [and] potentially requiring some outside support at
times”.
“The latter events in the developed countries could
negatively affect the Cambodian economy and thereby the financial
capacity of bank borrowers,” Kuo said, adding Campu Bank was
“increasingly exposed to sovereign risk as it deposits its excess
liquidity with the central bank”.
However, Moody’s affirmed Campu
Bank’s credit ratings at Ba1 for local-currency deposits and issuances,
B1 for foreign-currency issuances and B3 for foreign-currency deposits,
saying those ratings remain “stable”.
Investors typically use
credit ratings from agencies such as Moody’s to measure the risk
inherent in buying a particular corporate or sovereign debt issuance.
Moody’s
defines banks with B-grade and Ba-grade ratings as being speculative
and subject to “high” and “substantial” credit risk, respectively.
Moody’s
announcement comes just two weeks after downgrading ACLEDA Bank’s
local-currency long-term deposit and debt issuer ratings from Ba1 to
Ba2, citing the loss of two major shareholders.
Moody’s
sovereign risk analyst Christian De Guzman said yesterday the outlook
change indicates a downgrade of Campu Bank’s credit rating is likely as
well.
“We have flagged an increased likelihood that Cambodian Public Bank will be downgraded over the next 12 to 18 months,” he said.
Campu
Bank’s Phan Ying Tong pushed back against those assertions, though,
saying Moody’s outlook change is more a appraisal of the US EU
economies. “Whenever the US and EU economies have a problem, Cambodia
has one as well because 90 percent of our economy uses US dollars.
That’s why they changed our outlook. However, our bank has no problem,”
he said.
Campu Bank had a 19-percent market share in deposits and
an 18-percent share in loans at end of 2010, according to the Moody’s
report, as well as a 3.4-percent non-performing loan ratio.
ANZ
Royal Bank CEO Stephen Higgins said the downgrade and outlook change of
the two banks were internal issues, claiming that Cambodia is on the
upward trend.
“The downgrades of Acleda and Campu were due to
issues specific to them rather than being a general Cambodia issue,”
Higgins said yesterday. “I don’t foresee a downgrade of Cambodia’s
sovereign rating in the near future.”
A sovereign downgrade, he
added, would be more of an embarrassment than an economic problem
because Cambodia isn’t accessing sovereign debt markets.
Moody’s
De Guzman confirmed the Kingdom’s sovereign debt rating remained stable
at B2, or five notches below investment grade. “Despite the pressures
from rapid credit growth that have contributed to the negative rating
actions for the banks, we believe that this poses a large, yet
manageable, risk to the government,” he said.
“In addition, the
government’s sovereign rating is supported by continued inflows of
foreign aid support the government’s fiscal position,” De Guzman said.
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