ABA retains B+ stable outlook credit rating

ABA retains B+ stable outlook credit rating

Advanced Bank of Asia Ltd (ABA), a subsidiary of National Bank of Canada, has retained global ratings agency Standard & Poor’s (S&P’s) overall B+ rating with a stable outlook. ABA is one of Cambodia’s leading banks and has bonds listed on the Cambodia Securities Exchange (CSX: ABAA22A).

Retention of the stable outlook rating reflects S&P’s view that the bank will sustainably manage rapid loan and deposit growth despite the COVID-19 pandemic. The researchers also expressed the opinion that ABA’s business franchise trajectory, capitalisation, risk profile, funding and liquidity will remain unchanged over the next 12 months.

Despite a stable outlook, the B+ rating signifies that the issuer is relatively risky, with a higher than average chance of default. B1/B+ ratings are considered just below investment grade but are the highest rating in the non-investment grade bracket. Moody’s Investors Service uses B1 as their highest grade in their non-investment ratings bracket, while S&P Global Ratings and Fitch Ratings use B+ as the equivalent measure.

S&P said, “ABA’s business franchise is strengthening, in our view, [and] 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.”

S&P also mentioned the stable business position of ABA and its potential for further growth: “We expect ABA to continue to experience absolute and relatively 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.”

They added the bank’s large customer deposit base will likely continue to grow at least in line with loans, with its strong digital platforms {becoming] a competitive advantage. The S&P report concludes: “We view the increase in customer deposits as positive, given these funds are generally stickier than wholesale funding. 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.”

Chief International Operations Officer at ABA Bank Zhiger Atchabarov 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.”

S&P assigned a B credit rating to ABA Bank in 2017. The rating was upgraded to B+ in 2019 based on the bank’s material and growing market share of loans and deposits and above-average profitability.

In its third-quarter report disclosure this year to the CSX, the bank’s total assets were reported as having increased by 29.52 percent to $5,657,731,893 with total equity increasing by 46 percent to $720,290,678 compared with Q3 2019 results.

The bank also reported $103,910,518 in after-tax profit for the nine months ending on Sept 30, despite having restructured 10,807 loans amounting to $552.5 million, according to the same report.

ABAA22A was the first bond available to institutional and retail investors on the CSX. The bonds were issued for a total amount of 84.821 billion riels (around $21 million), with a maturity date of three years, paying a coupon rate of 7.75 percent per annum. The nominal cost of an individual bond in ABA is 100,000 riels. It is available to both institutional and retail investors.

Last year, National Bank of Canada reported it had signed a deal to pay $83.5 million to buy the remaining 10 percent of shares not under its ownership following its 2016 purchase of a 90 percent stake in the bank. Khmer Times