Cambodia Investment Review
ACLEDA Bank has demonstrated resilience in the first quarter of 2024 despite the broader challenges facing the Cambodian banking sector. The bank reported mixed results, with a net profit drop of approximately 30%, yet it maintained a cautious growth strategy and saw positive developments in its loan quality, according to a report released by Yuanta Securities.
Sector-Wide Challenges and Monetary Tightening
The Cambodian banking sector has experienced a challenging period in recent months, with loan growth remaining nearly flat. A spokesperson from Yuanta Securities told Cambodia Investment Review, this situation presents a difficult scenario for financially struggling individuals, including local SME owners and indebted households.
“In theory, if banks stop lending, in a simple model of capitalism with an interest system, someone must default. So it may seem that things are getting worse in the short run, and the NPL ratio might even further deteriorate for the time being. However, if we can successfully sustain through this period of monetary tightening, I believe it will eventually bring the system back on track in the not-too-distant future,” the spokesperson explained.
ACLEDA’s Cautious Growth and Improving Loan Quality
ACLEDA Bank’s cautious approach to growth appears to be paying off. In Q1 2024, gross loans grew by only about 1%, but the Non-Performing Loan (NPL) ratio decreased slightly for the first time since Q1 2022, indicating a potential stabilization in loan quality. “The high impairment loss allowance during the period was mainly due to the loan migration within the legacy NPL, affecting the net profit during the period,” the Yuanta spokesperson added. “We expect to see more impairment loss from the legacy NPL for this year, but the decrease in NPL ratio could be a good sign for the return to normal from possibly next year.”
Despite these challenges, ACLEDA Bank has managed to maintain a robust financial position. The slight growth in gross loans is a testament to the bank’s cautious but strategic lending practices. This approach has helped mitigate risks and maintain the quality of the loan portfolio, which is crucial in a period of economic uncertainty.
Mobile Banking Surge and Deposits Growth
One of the significant areas of growth for ACLEDA Bank has been its digital banking services. The bank’s mobile banking platform reported substantial growth, with the number of mobile users rising by 23.9% year-on-year (YoY) to approximately 3.7 million. Transactions on the mobile platform more than doubled, and the total value of transactions increased by 75.2% YoY, reflecting the bank’s successful enhancements to its mobile app, which have made it more user-friendly and secure.
On the deposits front, ACLEDA Bank experienced solid growth. The number of deposit accounts increased by 17.0% YoY, reaching 4.76 million. Total deposits from customers and other banks grew by 12.5% YoY to USD 7,637 million, driven by significant contributions from Current Account and Savings Account (CASA) deposits, which saw their rate ratio improve to 48.3%.
Financial Performance and Future Outlook
Despite the positive trends in digital banking and deposits, ACLEDA Bank’s financial performance was tempered by increased interest expenses and higher impairment losses. Interest income rose by 6.3% YoY to USD 195.3 million, but interest expenses also increased significantly by 16.8% YoY to USD 88 million, leading to a decrease in the net interest margin (NIM) from 6.1% to 5.1%. The high impairment loss allowance, mainly due to the loan migration within the legacy NPL, impacted the net profit for the period.
However, there are positive indicators for the future. The slight decrease in the NPL ratio suggests potential future improvements in loan quality. The bank’s cautious approach to growth, along with its efforts to enhance digital banking services and maintain loan quality, provides a foundation for potential recovery in the near future.
“The high impairment loss allowance during the period was mainly due to the loan migration within the legacy NPL, affecting the net profit during the period,” the Yuanta spokesperson noted. “We expect to see more impairment loss from the legacy NPL for this year, but the decrease in NPL ratio could be a good sign for the return to normal from possibly next year.”
