Global credit-rating agency S&P Global Ratings on December 16 upgraded the Stand-Alone Credit Profile (SACP) of the Kingdom’s largest commercial bank ACLEDA Bank Plc from “bb-” to “bb”.
S&P affirmed its ‘B+’ long-term and ‘B’ short-term issuer credit ratings on ACLEDA with the outlook on the long-term rating remaining stable.
It said: “We affirmed the ratings because we expect ACLEDA to maintain its improved capitalisation, strong market position, sound earnings and above-average funding profile in Cambodia over the next 12 months.
“We assess the risks of economic imbalances in Cambodia’s banking system to be high, stemming from rapid credit expansion and high property prices.
“But the direct negative impact on ACLEDA’s financial profile is likely to be limited, given the bank’s relatively low exposure to construction and real estate activities.”
ACLEDA president and group managing director In Channy attributed the SACP upgrade to the following reasons – the bank maintains a diversified asset, careful management and takes all relevant risks as a basis for strong growth and capitalisation.
He said: “All of these factors reflect the strength of ACLEDA Bank’s business network operation by maintaining sustainable revenue without any impact.
“The stable outlook reflects the view that ACLEDA Bank Plc will maintain its financial profile, with sufficient buffers to stabilise the business.”
S&P pointed out that ACLEDA will benefit from its capital accretion over the past few years, which is a result of its sound capital generation (internal and external) and consistently lower loan growth than the system’s.
It said: “This has led to an improvement in our risk-adjusted capital [RAC] ratio calculation for the bank to about 8.6 per cent as at September 30, 2020, from 8.2 per cent as at December 31, 2019.
“We forecast ACLEDA’s loan growth will remain well below similar-sized peers’ but earnings should remain sound, leading to the bank maintaining a RAC ratio of 8.0-8.5 per cent over the next 18 months.
“We revised our assessment of the stand-alone credit profile [SACP] of ACLEDA to ‘bb’ from ‘bb-’ to reflect the improved capitalisation.
“We believe ACLEDA’s modest loan growth has ensured there are limited latent risks in the portfolio, and the data so far has indicated a limited amount of restructured loans associated with Covid-19.”
S&P said the low levels of restructured loans relative to the system reduce the risk of further asset quality deterioration over the next 12 months.
Asset quality across Cambodia’s high-risk banking system remains dependent on the economic recovery over the next 12 months, particularly in regard to tourism and foreign investment, it said.