Financial InformationPresident & Group Managing Director's Report

President & Group Managing Director's Report

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

"Prolonged political disagreement and dialogue stemming from the July, 2013 elections and continuing to July, 2014 had a significant impact on the growth and income of the Bank. The Bank's overall performance is a testimony to the soundness and preparedness of the Bank and its stakeholders in response to the reality of the market instability during this contentious period. Moreover results did turn around with strong growth of domestic savings and loan assets, both of which remain robust. Our valued customers, when viewing the entire banking community's performance, have been reassured they made the right choice by choosing ACLEDA. 2015 is seen as one of the most stable environments for doing business where both the Bank and its customers can take the opportunity to grow together, and we can continue to offer our valued customers the most secure financial services and products via our convenient electronic infrastructure which offers self-service and bank automation whereby customers can make full use of the Bank's services as needed."

Performance in 2014

Competitive Environment

Cambodia's financial market with its liberal regulatory environment is highly competitive with more than 47 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 international 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 2014

  • ACLEDA Bank increased lending to the agricultural sector in 2014. Total gross loans outstanding were US$1,994.34 million of which US$389 million or 19.51% was lent to agriculture, among many other sectors. This compares with December 2013 when total gross loans outstanding were US$1,468.09 million of which US$286 million or 19.48% 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 2014 ACLEDA Bank net profit after tax was slim which resulted from the reduction of loans in the micro business loan sector. In 2013, we had 210,711 micro business loans; by the end of December 2014, we had 204,406 micro business loans.
  • The Bank continued its cost reduction and risk control initiatives to maximize income. Non-performing loans (NPLs) in 2013 were 0.55% However, NPLs for 2014 were maintained at 0.36% while the Bank's operating efficiency ratio was 40.7%.
  • The Bank introduced an international credit card service on November 8, 2013, and captured the largest market share of credit cards issued in 2014.
  • 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 Bank established its first 'seven days a week' branch for financial services in the Aeon Mall, equipped with ATMs offering a bag deposit option for the tenant merchants. This is in addition to the CDMs (ATM Cash Deposit and Withdrawal Machines) which are fully functioning and offer 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 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.
  • ACLEDA Bank launched its internet banking service on July 4, 2014 available to both private and corporate customers, providing a convenient and secure alternative for business transactions as needed.
  • ACLEDA Bank Plc. has been honored by the World Economic Forum as a Global Growth Company at the World Economic Forum in Manila, the Philippines on May 21-23, 2014.

Retail, Micro and Small Business

Micro Loans grew by 6.73%, Small Loans by 36.53% and Personal Loans by 22.38%. 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 6.76% of total loans outstanding – down from 7.31% a year earlier.

Deposits grew by 34.04% to US$2,202.38 million, of which the retail sector is by far the largest with a significant amount derived 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$1,994.34 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 2014 comprised 219 ATMs and 2,116 POS terminals throughout the country with 798,131 cards issued.

Medium and Corporate Business

In 2014 the amount of loans outstanding in this sector grew by 35.85%, while the number of medium enterprise customers increased by 9.22%. Higher 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, Payroll for Government Officers 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 25 provinces. In addition, several new large accounts were acquired in 2014, as the result of 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 2014 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 15.31% in fee and commission earnings from this division. As a result, fee and commission earnings (excluding loan fees) climbed 2.57% and accounted for 8.76% of gross revenue for the year. If loan fees are included the figure increases to 11.52% of gross revenue for 2014.

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 designed 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 significant new international correspondents to our network during the year. At the end of 2014 we had 470 correspondents covering 59 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 2015

  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;
  3. 'Follow our customers' by providing a comprehensive range of financial innovations as they move up the wealth ladder;
  4. Focus on expanding value added fee-based services to diversify the income stream and reduce dependence on capital;
  5. Continue to invest heavily in R & D to maintain our lead in core banking and financial products/services;
  6. Enhance our risk management function and embed 'risk awareness' into our daily working practices;
  7. Build strategic partnerships with reputable counterparties, domestically and internationally, in areas that are synergistic with the Bank's core business to develop new capabilities and financial services;
  8. Explore opportunities for further regional expansion;
  9. Establish a leading position in payments and settlements for the expanding capital market;
  10. Enhance our Corporate Social Responsibility program to improve the welfare and living standards of our employees and the community.

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 2014 and in anticipation of a happy and prosperous 2015.

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