International credit rating group Moody’s Investors Services assigned its first-ever rating to a Cambodian financial institution on Monday, bestowing Acleda Bank Plc a lowly D on Moody’s A to E rating scale.
But both Acleda officials and Moody’s said the D was nothing to be ashamed of.
“D is about as low as you can go without being in default,” said Patrick Winsbury, a senior credit officer with Moody’s who helped prepare the report.
“But within the context of operating in Cambodia, with all the uncertainty, getting a D is quite an achievement,” Winsbury said by telephone and email from Singapore on Wednesday.
According to Moody’s, a D indicates that a bank has “modest financial strength” but that it is “limited” by “a highly unpredictable and unstable operating environment.”
The report stated that the Acleda bank, a joint venture between Cambodian and international financiers, had a relatively sound financial groundwork, with total assets of $90 million, committed international and domestic backers and a good history of recouping loans. And with branches across Cambodia, the report said, Acleda is in a good place to tap into the country’s underserved banking needs.
“If I had to put my money on deposit in Cambodia, Acleda Bank would be very high on my list,” Winsbury said. “Of course, there is no deposit insurance in Cambodia…so spreading your money around is a good idea.”
But a separate Moody’s report also released on Monday gave Cambodia’s entire banking system a D and was notably more pessimistic.
“As yet there is no commercial code and Cambodia’s judiciary appears ill-equipped to deal with commercial disputes,” it read. “Court procedures are frequently lengthy and allegations of corruption are widespread.”
The report also claimed that the Cambodian economy is vulnerable to political instability and increasing competition from China in the textile industry. And after years of civil war and uncertainty, many Cambodians have little trust in their banking system, the report stated.
Still, officials at Acleda remained buoyant.
In Channy, the bank’s general manager, said Moody’s rating would help get Acleda’s name out to the international community and “build confidence” in the bank.
“We want [Moody’s] to look, so they can tell the public, ‘Acleda Bank, is a healthy institution,’” In Channy said.
Moody’s performs ratings only upon request, and to date, no other Cambodian banks have opened their books to the agency, In Channy said.
Neither has the government, according to Winsbury.
Tal Nai Im, director-general of the National Bank of Cambodia, also welcomed the news of Acleda’s rating.
“I think if an international ratings agency comes to do a rating of a Cambodian Bank, it is a good thing,” she said. “It gives the foreign investor confidence to invest.”
But it may be some time before Acleda can offer stocks or bonds to the public. Cambodia does not have a stock market.
And while the National Bank of Cambodia has officially stated that it would like to have a functioning market by 2007, officials at both the NBC and Moody’s say that date is overly optimistic.
But when the necessary laws and institutions are in place, In Channy said, “Acleda Bank will be the first bank listed.”