Managing Director & CEO's Report

Performance in 2009

ACLEDA Bank Lao Ltd is the first Commercial Bank from Cambodia to invest in the Lao PDR with a Paid-Up Capital of LAK100 billion subscribed by five internationally prominent shareholders. It was licensed to operate as a Commercial Bank by the Bank of the Lao PDR in July, 2008. As of December 31, 2009, our shareholders were:

ACLEDA Bank Plc. (Cambodia) 39.90%
The Netherlands Development Finance Company (FMO) 25.20%
Triodos-Doen (Netherlands) 9.50%
Triodos Fair Share Fund (Netherlands) 9.50%
International Finance Corporation (World Bank Group) 15.90%

Competitive Environment

The high demand for financial services from entrepreneurs in the Lao PDR matches ACLEDA’s objective to support local economic development, generate income and employment for the households. Our goals are to reach out and provide them with access to a secure and reliable financial services to safeguard their assets. ACLEDA Bank Lao Ltd. offers a complete range of commercial, retail banking products, services and business consultancy to provide credit facilities to those who need to set up and expand their small and medium enterprises in the Lao PDR.

As a result in 2009 ACLEDA Bank Lao Ltd’s reputation and market position grew rapidly and we are now considered to be amongst the top private commercial banks in the country out of a field of 19. Opinion surveys cite our retail banking services, human resources training and development and especially our customer service.

In the strategically important small-lending segment, which is the core of our business strategy, we have seen increasing competition from some of the new entrants into the market and loan growth in this area has and will continue to be more challenging. This has been compensated to a large extent by encouraging growth in our retail banking. All products and services of ACLEDA Bank Lao Ltd are growing rapidly in line with our forecasts.

Network in 2009

At the end of 2009 ACLEDA Bank Lao Ltd had 12 offices:

1 Headquarters
4 Branches and
7 Service Units

Total staff at the end of the year numbered 246

Management Structure

One of the most important challenges in 2009 was strengthening the capacity of both our Khmer and Lao staff. The rapid expansion of our business and the several new functional units and offices inevitably imposes stresses on the existing management structure and in order to address these we have taken into account two important principles: firstly, to cluster those functions which naturally go together to obtain efficiency and control through better communication between our experienced staff and our new Lao colleagues, and secondly to preserve the concept of dual control. Most importantly we have made great efforts to infuse our Lao staff with our group corporate culture of commitment, responsibility and integrity.

Operational performance

Our total loan portfolio grew by 965% to US$12.03 million whilst our deposits increased by 875% to US$14.4 million, a significant amount of which came from first time depositors such as customers in rural areas where we have newly opened offices. It is satisfying to note that the retail deposits cover the total loans outstanding and with the future introduction of ATM’s we are confident that we shall continue to be able to fund our portfolio growth from our customer deposits with having to recourse to more expensive institutional borrowing.

Corporate Business

Cash Management performed strongly with domestic transfers increasing by 2,725% to US$6.4 million while international transfers rose 1,184% to US$3.6 million. Foreign exchange earnings rose by 595% to nearly US$28,000 which is particularly satisfying as our F/X business is 'settlement only' — the bank does not trade speculatively or take positions.

Administration

Tighter cost control made an important contribution to our 3 years break event plan with non-interest expense to gross income reduced from 2,392% in 2008 to 170% in 2009. We expect this to show a further substantial decline in 2010.

The network expanded from 3 to 12 offices, of which we opened 2 new branches and 7 service units.

The number of staff employed increased from 104 at the end of 2008 to 246 — a rise of 136.54%. Although new offices accounted for part of this the main factor was growth of existing branches. 77 career development and refresher programs were run for mature staff and 8 induction programs for new recruits. In addition 118 staff attended our ACLEDA ASEAN Center in Phnom Penh which was combined with study tours to ACLEDA Bank Plc’s branches in Cambodia.

Strategic Priorities

Our long term strategic priorities are:

To build an integrated retail and commercial bank in Laos replicating the successful model of ACLEDA Bank Plc in Cambodia.
Strengthening the capacity of and instilling in our staff our core corporate values: willingness, professionalism, responsibility, transparency and accountability.
Developing the managerial skills of new senior Lao staff through training and mentoring so that they can take over from the seconded Cambodian management team according to plan.
Expand the loan book consistent within the constraints of maintaining high portfolio quality.
Enhance customer service and develop new products to give our clients more choice and flexibility.
Expand and upgrade our office network in both urban and rural areas to meet the needs of those customers who have limited or no access to banking services, especially in the rural and suburban areas, so that ultimately ACLEDA Bank Lao can offer a comprehensive nationwide coverage.
Modernize the electronic banking services and products by developing and launching new products and services especially those based on cards and ATMs to deliver quality and convenience to our customers by providing service 24 hours a day 365 days a year.

In the light of these encouraging, it is my greatest pleasure to record my sincere gratitude to all our customers, my colleagues on the Board of Directors, Shareholders, management and staff, our professional advisors from ACLEDA Bank Plc Cambodia and, not least, for the support of the Government of the Lao People’s Democratic Republic, the Bank of the Lao PDR and local authorities. Best wishes for prosperity and happiness to you and your families for the coming year.