Moody’s confirms Nanyang Commercial

Moody’s Investors Service said it confirmed Nanyang Commercial Bank, Ltd.'s (NYCB) Baa2(hyb) foreign-currency subordinate debt rating and Ba2(hyb) foreign-currency preferred stock non-cumulative rating.

The agency completed its review started on Dec. 7 for downgrade on the bank and lowered its deposit ratings. The outlook is now negative.

“The negative outlook reflects the downward pressure on NYCB's credit profile, stemming from the bank's lending to mainland China's property sector. This risk could strain the bank's asset quality and profitability if the downturn in the mainland property sector is prolonged and developers' default increases. NYCB's lending to mainland real estate companies accounted for a high single-digit percentage of its gross loans. Most of these loans are booked outside of mainland China and have low collateral coverage.

“Moody's therefore believes NYCB will need to increase its loan loss provisions, which will strain the bank's profitability despite the bank's net interest income will be supported by the wide net interest margin (NIM). NYCB's NIM has likely peaked and will stay broadly flat as the market interest rate remains high,” the agency said in a press release.

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