Tight Loans Squeeze Acleda Profits in ’09

Annual profits at Acleda Bank fell 49 percent in 2009 as loans grew by only 16 percent, the bank said yesterday, marking a decrease in annual loan growth. 

Profits dropped because the interest paid on fast growing deposits increased while loan payments received from borrowers did not keep pace, as they had in 2008.

According to the financial data, profits of $9.9 million in 2009 came as total assets at Acleda grew by 30.7 percent to $905 million, and deposits increased 37.4 percent to $670 million, requiring payments to depositors of roughly $28 million. Lending by Acleda in 2009 grew by 16 percent, far slower than 2008’s 47.3 percent.

“It was better than we feared it might be, but it was not better than the year before,” Acleda Vice President John Brinsden said.

“We, in the first half the year, and other banks were being very cautious indeed with loans. We also had falling demand for loans because our customers said ‘we cannot afford loans because our business is not expanding,'” Mr Brinsden said, adding that a lack of investment accounts for much of the bank’s deposit increase.

Lending began to increase by the second half of last year, accounting for much of the 16 percent growth figure, he said.

While the International Monetary Fund has warned that commercial banks are vulnerable to nonperforming loans, Mr Brinsden said that such loans did not play a role in last year’s profit decrease and only comprised 0.45 percent of Acleda’s total loan portfolio in 2009.

Last year also saw the bank further expand into Laos, adding nine offices to its three branches there. The bank also gained a high-profile investor. In December, multinational conglomerate Jardine Matheson purchased a 12.25 percent stake in Acleda.

Mr Brinsden said the bank currently has a high level of liquidity and does not expect the new Hong Kong-based investor to press for major changes in the bank or immediately inject capital.

“They don’t squeeze too hard, they always want the investment to build to upon itself, to be prudent. They would rather we grew from our strengths,” he said.

Dieter Billmeier, vice president of Canadia Bank, said that, though his bank is still finishing its audit, its numbers tell a story similar to Acleda’s and those of other banks.

Profits decreased more than 15 percent at Canadia in 2009, as assets grew 15 to 20 percent, all while the bank’s loan portfolio dropped by 8 percent, he said.

“We have been cautious ourselves in lending and investors have been cautious, putting the money in the bank but not taking out loans,” he said.

At a conference on banking and microfinance in Phnom Penh yesterday, banking industry executives discussed means of increasing profitability. How to enhance the payment system for banks and make them more competitive in international markets was the theme of the conference.

“The financial crisis has taken its toll on capital markets and local financial markets remain under developed,” Tal Nay Im, director-general of the National Bank of Cambodia, told the conference, adding that further integration into regional and international markets was essential for the growth of Cambodia’s banking sector.

Despite what she called “confidence in the banking sector” seen through the entry of new foreign banks to the country, she said much more needed to be done to improve payment systems to help encourage international transactions and inter-bank lending, all of which helps to increase profits.

Bretton Sciaroni, a senior partner at Sciaroni and Associates and legal advisor to the government, said despite major steps forward toward a modernized banking sector, payment transfers here are still mainly carried out using cash.

He urged newcomers to understand the regulations set out by the NBC in order to comply with the rules, which are generally perceived as matching up to international standards.

The Negotiable Instruments and Payment Transactions Law, adopted in 2005, is applicable and addresses regulation on non-cash payments between banks and electronic banking abroad.

Even with the law, “many gaps and problem areas remain unaddressed,” he said.

Despite numerous government directives drawn up by the NBC to reform payment systems and transactions, much of the existing legislation still needs firm implementation, he said.

“The banking system has to install confidence in the public at large,” he added.


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