Financial InformationPresident & Group CEO's Report

President & Group CEO's Report

Dr. IN Channy, President & Group CEO of ACLEDA Bank Plc.

"With the inclusion of public sector customers to the current more than one million private sector customers, 2013 produced another record result, even given the political turbulence following the national elections in July; the Bank's profits surpassed its own projections, and at the same time risks were mitigated to a minimum level. The Bank continues to diversify its financial products and services centered on payment services by means of multi major credit card payments, and infrastructure. The Bank believes in a general positive economic outlook for Cambodia, and it expects another excellent year in 2014."

Performance in 2013

Competitive Environment

Cambodia's financial market with its liberal regulatory environment is highly competitive with more than 39 commercial and specialized banks as well as increasingly aggressive microfinance institutions. In spite of this, amongst the commercial and specialized banks ACLEDA Bank managed to maintain its position as market leader in terms of assets, loans, deposits and profitability, as well as in the number of offices and ATMs throughout the country. A Foreign Corporate Desk has been set up to serve our corporate customers and to fulfil our goal to service all segments of the business community, while making available expanded financial services to the public sector throughout the Kingdom.

Operational Highlights in 2013

  • ACLEDA Bank increased lending to agriculture in 2013. Total gross loans outstanding were US$1,468.09 million of which US$286 million or 19.5% was lent to agriculture, among many other sectors. This compares with December 2012 when total gross loans outstanding were US$1,253.74 million of which US$233.3 million or 18.6% went to agriculture. We have targeted the agricultural sector because we have confidence in small farmers who have responded to the Royal Government's new rice export policy. This includes an increased availability of high grade rice mills for export, which guarantees an available market for farmers.
  • In 2013 ACLEDA Bank posted a record profit which resulted from our high margin loans to small businesses and our Low and Medium Enterprise loans as well as growth in the micro business loan sector. In 2012, we had 208,920 micro business loans; by the end of December 2013, we had 210,711 micro business loans.
  • The Bank continued its cost reductions and risk control to maximize income. Non-performing loans in 2013 were maintained below 0.55% while the Bank's operating efficiency ratio improved from 42.3% to 38.6%.
  • The Bank Introduced an international credit card service on November 8, 2013, and captured a market share of more than 20% in a period of less than two months.
  • ACLEDA Bank upgraded its electronic banking infrastructure which enables the Bank and its customers to remain in close contact. In addition, customers of other banks also have access to ACLEDA Bank customers in real time and with a high level of security.
  • ACLEDA CDMs (ATM Cash Deposit and Withdrawal Machines) have fully functioned and helped establish another alternative for ACLEDA Bank's customers to maximize their transactions and increase their business activities.
  • Wireless Point of Sale (POS) terminals' usage has been expanding to enhance convenience and security for customers.
  • Servicing the public and private sectors through the provision of social security and direct payments which allows our customers a convenient one-stop service while increasing our local currency reserves.
  • ACLEDA's payroll services have continued to gain new customers from the commercial and public sectors as well as providing cross-selling opportunities for their employees.

Retail, Micro and Small Business

Micro Loans grew by 7.01%, Small Loans by 12.47% and Personal Loans by 18.59%. Housing Loans decreased slightly due to still weak conditions in the property sector and the continued application of stricter property valuation guidelines. Housing Loans represent only 7.31% of total loans outstanding – down from 7.47% a year earlier.

Deposits grew by 12.47% to US$1,643.08 million, of which the retail sector is by far the largest with a significant amount deriving from first time depositors such as employees paid through our Payroll Service and customers in rural areas where we have opened new offices as well as the expansion of our mobile phone banking. It is encouraging to note that retail deposits cover the total loans outstanding of US$1,468.09 million.

An important factor in the growth of deposits was the continuing development and expansion of our automated delivery system which at the end of 2013 comprised 167 ATMs and 1,279 POS terminals throughout the country with 797,980 cards issued.

Medium and Corporate Business

In 2013 the amount of loans outstanding in this sector still grew by 17%, while the number of medium enterprise customers increased by 6.53%. High margins were achieved by the popularity of our Overdrafts and Trade Finance.

Cash Management performance has increased strongly through our arrangement with government agencies, in particular the National Social Security Fund for Civil Servants, National Fund for Veterans, and Vehicle Stamp Tax collections. More recently, the National Social Security Fund awarded ACLEDA the management of the Private Sector Social Security Fund, appointing the bank as custodian to receive employers' and government contributions in 23 provinces. In addition, several new accounts were acquired in 2013, the most significant of which were the extension of the ATMs and ACLEDA Unity bill payments for public utilities to additional provinces. The National Treasury's receipt and payments facility, which originally covered only a few provinces, has expanded nationwide. This has had a positive impact on our local currency cash flow and has enabled us to fund our Riel loan portfolio entirely from deposits. Demand for Payroll Service was particularly strong in 2013 with a number of government organizations, and their officials, and a number of large local and international companies and official organizations signing up which provided excellent opportunities for cross-selling of other products.

Our life insurance distribution agreement with Prudential Assurance contributed significantly to our long term funding, and the scheme itself provided a useful source of off-balance sheet revenues.

Trade Finance increased substantially, contributing to a rise of 19.84% in fee and commission earnings from this division. As a result fee and commission earnings (excluding loan fees) climbed 16.24% and accounted for 8.87% of gross revenue for the year. If loan fees are included the figure increases to 11.45% of gross revenue for 2013.

Treasury and International

Foreign exchange earnings continue to grow and made a valuable contribution to our Net Fee and Commission Income. As our F/X business is to support our customers' businesses only — the bank does not trade speculatively or take positions — this is a low risk and stable source of income, which has grown consistently over time, produced good margins, and built up long-standing relationships with money changers and currency dealers.

The Bank's Balance Sheet has been further strengthened by robust inflows of customer deposits resulting in a healthy loan-to-deposit ratio which provides a solid platform to support our growth in selected market operations.

We continued to strengthen and deepen our Financial Institutions relationships and added some substantial new international correspondents to our network during the year. At the end of 2013 we had 480 correspondents covering 60 countries. In addition we have a dominant share in the market for local banks' and microfinance institutions' domestic accounts and provide funds transfer services for them throughout the country.

Strategic Priorities for 2014

  1. Using experience gained in our core micro and small businesses to develop our "service culture" and grow our services as the market expands.
  2. To grow, with selected major customers, options for partnering with best specialized/expertise partner(s) to provide syndicate finance.
  3. Focus on expanding value added fee based services to diversify the income stream and reduce dependence on capital, which includes the government financial services delivery fees.
  4. Emphasize investment in R & D to develop core banking and financial products/services of universal appeal to satisfy the needs of all customers, and to continue upgrading IT Systems to enable peak competitiveness in support of network management and expansion both locally and internationally while at all times taking into account risk mitigation.
  5. To invest in multi-channel systems:
    • for the bank's operational improvement and customer satisfaction while significantly reducing operational risks by automation rather than manual procedures; and
    • for the enhancement of the delivery system for products and services and shorten the workflow/process-flow by focusing on delegation of responsibility and authority down to front-line management and staff while decreasing paper work to guarantee quick service to customers.
    • for maximizing productivity by letting staff cross-function.
  6. To explore and develop strategic partnerships with reputable counterparts in areas that are synergistic with the bank's core business to diversify experiences and to lay the groundwork for further investment opportunities, and continue to work with our strategic shareholders to develop new capabilities and financial services.
  7. Continue to develop all ACLEDA Bank Plc.'s subsidiaries to have a firmer position with competitive advantage in all markets they are positioning, and investigate and develop opportunities for further regional expansion when the opportunities arise.
  8. Tap into payment and settlement opportunities for the new stock exchange for fee based income from securities transactions and make preparations to comply with all requirements of the Cambodian Stock Exchange.
  9. Enhance employee living standards and their welfare for happiness in accordance with the development of both the Institution and Cambodian society.

To all our customers, my colleagues on the Board of Directors, management and staff, our professional advisors and, not least the Royal Government and the National Bank of Cambodia, I offer my sincerest thanks — both for your support in 2013 and in anticipation of a happy and prosperous 2014.

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#61, Preah Monivong Blvd., Sangkat Srah Chork,
Khan Daun Penh, Phnom Penh, Cambodia.
P.O. Box: 1149
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