When Kazakhstan-based investment bank Visor Group bought Advanced Bank of Asia (ABA) in 2007, it inherited some problems in terms of its lending portfolio. What is your strategy for dealing with your non-performing loans (NPL), among the worst in Cambodia?
I wouldn’t say it’s a big problem. Of course we are facing an issue with NPLs, but every bank in Cambodia faces this issue now as a result of the global downturn and the structure of the domestic economy.
Our NPL ratio was quite high in 2007, around 25 percent, and we decreased it to around 12 to 13 percent last year. But it’s a question of economies of scale.
We had a small loan portfolio, and there were a few – and only a few – loans that could be classified as doubtful or bad loans.
We created allowances, provisioning, in accordance with National Bank of Cambodia (NBC) requirements, but this year we recovered a major part of these NPLs and expect to decrease our NPL ratio to around 7 percent.
ABA is a mid-sized lender, 15th in terms of deposits out of 24 commercial banks last year. There are now 28 banks. Can that many survive?
It’s a quite-competitive market, but it is also highly concentrated, with the top four capturing around 65 percent of market share, in terms of total assets.
This top four is a stable group, and we realise that they will continue to be major players, at least in the near future, but it is not so clear that all the mid-sized banks will be strong players in the market.
If you look at the results from the first seven months of this year, not all banks are growing this year; some are decreasing.
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