Moody's changes outlook on Campu Bank's BFSR to negative

Stocks and Financial Services Press Releases Tuesday September 20, 2011 08:33
Bangkok--20 Sep--Moody's
Moody's Investors Service has changed the outlook to negative from stable on Cambodian Public Bank's (Campu Bank) "D" bank financial strength rating (BFSR), which maps to a baseline credit assessment of Ba2.
At the same time, Moody's has affirmed Campu Bank's ratings, including its D BFSR, Ba1 local-currency deposit and issuer ratings, B1 foreign-currency issuer rating and B3 foreign-currency deposit rating.
The outlook on the bank's local- and foreign-currency deposit and issuer ratings remains stable.

"The negative outlook for the bank's BFSR is mainly driven by the rising level of risk evident in the country's banking system, the result, in turn, of rapid credit growth over many years, and increasingly adverse economic developments in the advanced markets. The latter events in the developed countries could negatively affect the Cambodian economy and thereby the financial capacity of bank borrowers," says Christine Kuo, a Moody's Senior Credit Officer.

"Moreover, Campu Bank is increasingly exposed to sovereign risk as it deposits its excess liquidity with the central bank," adds Kuo.
Cambodia's government bond rating is B2.

"However, Campu Bank's deposit and issuer ratings are underpinned by strong support from its parent, Malaysia-based Public Bank Berhad (PBB), and hence the stable outlook is not affected," says Kuo. PBB has a C BFSR, A3 BCA, and A3 foreign-currency deposit rating.

Credit in the Cambodian banking system grew to USD3,241 million at end-2010 from USD604 million at end-2005, or at a compound annualized growth rate of 40% over the last five years.
Total assets in the system grew to 56% of GDP from 22% over the same period.

While Campu Bank has not grown its loan book since 2009, rising borrower leverage -- as a result of years of much higher credit growth than income growth -- is a rating concern for all banks operating in the country.

In addition, the Cambodian economy is very vulnerable to external developments due to its narrow base and heavy reliance on exports, tourism, and foreign investments. Hence the economic uncertainties in Europe and the US could impede Cambodia's economic growth.

At the same time, Campu Bank's BFSR reflects its established franchise in Cambodia, strong capital position, ample liquidity, good profitability and satisfactory asset quality. It had a 19% market share in deposits and 18% in loans at end-2010. It also reported an equity-to-asset ratio of 20%, a gross-loan-to-deposit ratio of 74%, and a 3.4% non-performing loan ratio on the same date. Its net profit in 2010 was 2.1% of average risk-weighted assets.

On the other hand, the BFSR also takes into account the challenges associated with the bank's operating environment, including its narrow economic base, its poor infrastructure and level of transparency, and the presence of corruption.

On the issue of support, Moody's believes that the likelihood of support from its parent -- in the event of stress -- is very high. The incorporation of such support could have resulted in multiple-notch uplifts in Campu Bank's deposit and issuer ratings from the Ba2 BCA.

However, its ratings are constrained by Cambodia's Ba1 local currency deposit and bond ceiling, B1 foreign currency bond ceiling, and B3 foreign currency deposit ceiling.

In light of Campu Bank's significant market share, Moody's also believes that the likelihood of systemic support for the bank, in the event of stress, is very high. But the incorporation of potential systemic support would not lead to any additional uplift in the deposit and issuer ratings due to the same country ceiling mentioned earlier and the very limited resources available to the Cambodian government to assist the bank, if needed.

The methodologies used in this rating were Bank Financial Strength

Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2007. Please see the Credit Policy page on for a copy of these methodologies.

Campu Bank is headquartered in Phnom Penh. At end-2010, it reported assets of USD991 million.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available.

Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website for further information.
Please see for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Christine S. Kuo
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308

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