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President & Group Managing Director's Report
"ACLEDA Bank saw 2015 as another productive year with the benefit of a peaceful and encouraging investment climate within which the Bank has diversified its growth and responded to the needs of our valued customers from all sectors of society. The year end kick start of the ASEAN Economic Community 2015 has opened a wider gateway of increased opportunity with even more diversified growth for 2016 by means of our comprehensive Electronic Bank Infrastructure and financial products and services."
Performance in 2015
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. 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 2015
- ACLEDA Bank increased lending to agriculture in 2015. Total gross loans outstanding were US$2,453.92 million of which US$543 million or 22.11% was lent to agriculture, among many other sectors. This compares with December, 2014 when total gross loans outstanding were US$1,994.34 million of which US$389 million or 19.51% 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 2015 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 2014, we had 204,406 micro business loans; by the end of December 2015, we had 213,158 micro business loans.
- The Bank continued its cost reduction and risk control efforts to maximize income. Non-performing loans in 2015 were maintained below 0.40% while the Bank's operating efficiency ratio was 38.91%.
- The Bank introduced an international credit card service on November 8, 2013, and captured a market share close to 30%.
- ACLEDA Bank has 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 23.17%, Small Loans by 25.87% and Personal Loans by 13.41%. Housing Loans have increased slightly due to high demand in this segment for first time homeowners. Housing Loans represent 7.25% of total loans outstanding compared to 6.76% of total loans outstanding in 2014.
Deposits grew by 18.80% to US$2,616.36 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$2,453.92 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 2015 comprised 280 ATMs and 2,595 POS terminals throughout the country with 813,222 debit cards issued.
Medium and Corporate Business
In 2015 the amount of loans outstanding in this sector grew by 21.01%, while the number of medium enterprise customers increased by 24.92%. 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, 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 2015 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 29.15% rise in fee and commission earnings from this division. As a result, fee and commission earnings (excluding loan fees) climbed 33.13% and accounted for 8.57% of gross revenue for the year. If loan fees are included, the figure increases to 11.24% of gross revenue for 2015.
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 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 2015 we had 444 correspondents covering 57 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 2016
- Maintain a strong capital base with Capital Adequacy Ratios comfortably exceeding regulatory requirements.
- Concentrate on developing our "service culture" personal accessibility for our customers, and grow our services as the market expands.
- Follow our customers' needs by providing a comprehensive range of financial innovations as they move up the wealth ladder.
- To grow, with selected major customers, options for partnering with best specialized/expertise partner(s) to provide syndicate finance.
- 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.
- Continue to invest heavily in R & D to maintain our lead in core banking and financial products/services.
- To invest in multi-channel systems.
- 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.
- 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.
- Establish a leading position in payments and settlement for the expanding capital market.
- 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.
- 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 customers base.
- Develop and upgrade Digital Banking-Mobile App, 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.
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 2015 and in anticipation of a happy and prosperous 2016.
Dr. IN Channy
President & Group Managing Director
ACLEDA Bank Plc
January 25, 2016.