IMF: Bank profits at risk

ASHORTAGE of “attractive” lending opportunities is posing profitability risks for the Kingdom’s banks given a growing deposit base and high interest rates, the International Monetary Fund said last week. The international financial organisation made the warning Wednesday as it presented its findings from two weeks of discussions with government ministers and senior officials on economic and financial developments in Cambodia. David Cowen, the deputy division chief in the IMF’s Asia and Pacific Department, told reporters that “healthy deposit growth” meant there was “ample liquidity” in the banking system, but that high rates on deposits could dent profitability given a slowdown in new lending. “We have expressed some concern that these high deposit rates may have some impact on bank profitability going forward if banks are not able to intermediate this liquidity into new lending opportunities,” he said. “Much of the deposits that have come in this year are currently being held in the banks’ excess reserves at the NBC [National Bank of Cambodia], and those reserves are remunerated at a very low level.” Stephen Higgins, chief executive officer at ANZ Royal Bank, said the lack of an interbank market, where banks make surplus funds available for other banks to borrow, and the low return offered by the NBC were an issue. “In a normal interest-rate environment, where we were earning a decent return on our surplus funds, we wouldn’t be complaining about too much money,” he said. Read Full Story fron Source