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S&P upbeat on ABA Bank’s franchise business, affirms ‘B+’ rating, stable outlook

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S&P affirmed its ‘B+’ long-term and ‘B’ short-term issuer credit ratings on Cambodian-based ACLEDA Bank Plc. Heng Chivoan

S&P upbeat on ABA Bank’s franchise business, affirms ‘B+’ rating, stable outlook

Advanced Bank of Asia Ltd (ABA Bank), a subsidiary of National Bank of Canada, on December 17 became the Kingdom’s second commercial bank to be given a ‘B+’ credit rating with stable outlook by global rating agency S&P Global Ratings.

This comes a day after S&P affirmed its ‘B+’ long-term and ‘B’ short-term issuer credit ratings on Cambodian-based ACLEDA Bank Plc. The outlook on the long-term rating is stable.

In a report issued on December 17, the S&P noted its view that ABA Bank will sustainably manage rapid growth in loans and deposits despite the Covid-19 pandemic.

The researchers also expressed their opinion that ABA Bank’s business franchise trajectory, capitalisation, risk profile, and funding and liquidity will remain unchanged over the next 12 months.

“ABA’s business franchise is strengthening, in our view, underpinned by significant growth in its market share. The bank continues to expand its loan market share, physical and digital distribution network, and customer base.

“We believe its expansion ambitions and good operating efficiency support its above-average profitability,” the S&P experts said in the report.

ABA Bank chief international operations officer Zhiger Atchabarov said the S&P rating reflects the bank’s performance, and especially the sound quality of its assets.

He said: “We welcome the credit rating reaffirmation by S&P. It confirms the solidity of our strategy, high quality of our assets and emphasises the financial stability of ABA despite current challenges, both local and global.”

The S&P also pointed out ABA Bank’s stable business position and its potential for further growth, saying that the institution will continue to experience absolute and relative rapid growth in its business franchise and loan book.

“The bank is well-positioned to take advantage of an expected post-pandemic economic rebound. This will likely be reflected in continued growth in its market share of loans and deposits over the next 18 months,” said S&P.

The bank’s large customer deposit base will likely continue to grow at least in line with loans, with its strong digital platforms to be a competitive advantage, the S&P report adds.

“We view the increase in customer deposits as positive, given these funds are generally stickier than wholesale funding.

“The National Bank of Canada has demonstrated an ongoing willingness to invest in ABA’s subordinated debt which, in our view, also gives ABA access to tighter pricing in wholesale debt markets,” it adds.

In 2017, S&P assigned a ‘B’ credit rating to ABA Bank and the rating was upgraded to ‘B+’ last year based on the bank’s material and growing market share of loans and deposits, with above-average profitability.

As of December 4, ABA Bank has a network of 78 branches and offices in 21 provinces. Last year, ABA Bank logged a record high profit.

Net income constituted $127 million, up 72 per cent compared to the end of 2018. As a result, the Return on Equity ratio (ROE) was 33 per cent last year, which is the highest in the industry.

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