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 »  Financial Information  »  President & Group Managing Director's Report

President & Group Managing Director's Report

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

"Commodity prices declined, business related to construction materials was slowing down due to a housing finance demand decrease in 2016. To cope with this changing financial environment, ACLEDA Bank Plc. shifted its growth from larger medium and corporate loans to small and lower medium enterprise loans and continued to diversify its financial products and services growth. By doing so, the Bank produced quite good results for the year. By year-end the Bank benefitted from the upgrade to our digital bank infrastructure and the ACLEDA Unity ToanChet mechanism enabling the Bank to reach out to customers in all corners of the country, and to remain close to our clients at any time by means of payment solutions as needed from ACLEDA Bank Plc. Customers now have access to their savings accounts and can conduct business from multiple and diverse platforms throughout the Kingdom."

Performance in 2016

Competitive Environment

Cambodia's financial market with its liberal regulatory environment is highly competitive with more than 50 commercial and specialized banks as well as increasing numbers of 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, ATMs, and POSs throughout the country. An integrated electronic infrastructure has been introduced and implemented servicing customers from all segments of the business community and from anywhere they wish to conduct business transactions without travelling to our branches and offices throughout the Kingdom.

Operational Highlights in 2016

  • Total loans outstanding in 2016 were US$ 2,771 million of which US$550 million or 19.83% was lent to agriculture, among many other sectors. This compares with December 2015 when total gross loans outstanding were US$ 2,454 million of which US$ 511 million or 20.81% went to agriculture.
  • In 2016 ACLEDA Bank posted Net Profit after Tax very close to the annual budget, which resulted from good margin of diversified loans to small businesses and our Low and Medium Enterprise loans as well as the growth in the micro and small enterprise loan sector. In 2015, we had 213,158 micro business loans; by the end of December 2016, we had 208,089 micro business loans.
  • The Bank continued its cost reduction and risk control efforts to maximize income. Non-performing loans in 2016 were 0.68% while the Bank's operating efficiency ratio was 36.38%, compared to 38.91% in 2015.
  • The launch of co-branded international cards on May 23, 2016 increased ACLEDA Bank’s market share in international cards in addition to the Bank's international credit cards introduced in November, 2013.
  • ACLEDA Bank introduced integrated electronic banking infrastructure so that its customers can conveniently make transactions globally and with a high level of security.
  • 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 7.97%, Small Loans by 13.65% and Personal Loans by 14.00%. Housing Loans reached 7.63% of total loans outstanding. Deposits grew by 16.64% to US$ 3,051.68 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 and Internet banking services. It is encouraging to note that retail deposits cover the total loans outstanding of US$ 2,771.096 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 2016 comprised 300 ATMs and 3,137 POS terminals throughout the country with 779,894 debit cards issued.

Medium and Corporate Business

In 2016 the amount of loans outstanding in this sector grew by 14.75%, while the number of medium enterprise customers increased by 15.50%. Good 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, the National Fund for Veterans, and Payroll for Government Officers and Vehicle Stamp Tax collections. As the custodian of the National Social Security Fund, ACLEDA Bank received employers' and government contributions in 25 provinces. In addition, several new accounts were acquired since 2014, the most significant of which were from the extension of ATMs and ACLEDA Unity bill payments for public utilities to additional provinces, and ACLEDA Internet Banking Service. 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 2016 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.

Collaboration with Forte for general insurance assisted our mutual customers to manage their financial resources effectively and efficiently, while at the same time this collaboration helped boost revenues as well as enhance a long-term source of funding for the Bank.

Trade Finance increased substantially and the Asian Development Bank named ACLEDA Bank Plc. as a leading Partner Bank in Cambodia on Trade Finance in its conference in Singapore on September 7, 2016.

Treasury and International

Foreign exchange earnings continued 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 moneychangers 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 2016 we had 401 correspondents covering 54 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 2017

  1. Maintain a strong capital base with Capital Adequacy Ratios comfortably exceeding regulatory requirements.
  2. Concentrate on developing our "service culture" personal accessibility for our customers, and grow our services as the market expands.
  3. Follow our customers' needs by providing a comprehensive range of financial innovations as they move up the wealth ladder.
  4. To grow, with selected major customers, options for partnering with best specialized/expertise partner(s) to provide syndicate finance.
  5. 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.
  6. Continue to invest heavily in R & D to maintain our lead in core banking and financial products/services.
  7. To invest in multi-channel systems.
  8. Build strategic partnerships with reputable counterparts, domestically and internationally, in areas where they are synergistic with the Bank's core business to develop new capabilities and financial services.
  9. Continue to develop all ACLEDA Bank Plc.'s subsidiaries to have a firmer position with a competitive advantage in all markets where they are positioned, and investigate and develop opportunities for further regional expansion when opportunities arise.
  10. Establish a leading position in payments and settlement for the expanding capital market.
  11. Create and develop Syndicated Loan and Project Finance with the objective to grow with selected major customers, with the potential for cooperation, with best specialized/expertise partner(s) to these products served with higher income.
  12. Develop and upgrade Electronic Banking Service (EBS) with Financial Technology Solution (FinTech) and Branchless in order to expand outreach, increase income efficiency, create cross-selling opportunities, be competitive, and conveniently serve a broader customer base.
  13. Develop and upgrade Digital Banking-Mobile App, ACLEDA Unity ToanChet, allowing two way global access, and enhance the Bank’s Biometric, CRM plus new financial products/services to support self-service, applying modern technology, to generate cost efficiency, expand global businesses and customer base, and support subsidiaries, as well as to allow cross-selling opportunities and conveniently serve more customers competitively.

The Challenges for 2017

The change of the regulatory environment from free interest rate to interest rate cap because the regulator issued a Prakas to set an interest rate ceiling on microfinance at 18% per annum. This Prakas may have some impact on the revenue for the year which requires the Bank to focus more on small and medium enterprise loans.

To all our customers, my colleagues on the Board of Directors, management and staff, and not least the Royal Government and the National Bank of Cambodia, I offer my sincerest thanks — both for your support in 2016 and in anticipation of a happy and prosperous 2017.

Dr. IN Channy
President & Group Managing Director
February 1, 2017.

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