Chea Chanto, NBC’s governor, also has warned tourists and the public to be careful of being defrauded by unlicensed money changers along Cambodia’s borders.

Money exchange shop

According to the announcement of NBC, “in order to guarantee personal interests and prevent accidental losses, the public should be careful, and in case of requiring the exchange of money, please, the public must change in shops that show their license, which is issued by the National Bank of Cambodia.”

The Phnom Penh Post quoted Chea Chanto as saying that “to avoid eventually losing out, customers should have their money exchanged at booths displaying operating licenses from the central bank.”

According to the notice, a few money changing shops, particularly along the border with Thailand have cheated visitors and have even passed counterfeit Cambodian riel to customers.

NBC inspection of money-changing racket on the Kingdom’s borders found many offered exchange rates far below the market rate, some as low as 2,500 riels for US$1. A dollar was worth 4,167 riels Monday, the Post reported.

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Although neither Jardines nor FMO, the Dutch development bank that sold its stake in ACLEDA, has announced the price of the sale due to a clause in the sale agreement, In Channy said Sunday that it would be considerably more than the $12.51 million book value of the stake.

“The sale price would be much higher than this amount because our bank has gained profits consistently,” he told the Post, adding that a confidentiality agreement signed between the three parties involved meant ACLEDA could not disclose the sum paid by Jardines. “However, it’s the market price.”

Shareholders’ equity in ACLEDA Bank at the time the agreement was signed was $102.69 million, according to In Channy. FMO held 8.34 million shares out of a total 68.15 million, he added, meaning their stake was worth $12.51 million.

FMO originally invested $490,000 in Cambodia’s second-largest lender in 2000 when it was a simple microfinance organisation, and had remained an investor – regularly injecting capital into the firm through a series of rights issues – as it developed into a hybrid bank that also receives deposits.

Alain Cany, group country chairman of Jardine Matheson Vietnam and a future director of ACLEDA once the deal is complete, was unavailable for comment Sunday.

ACLEDA Vice President John Brinsden said that opportunities to buy stakes in proven lenders in emerging markets, such as ACLEDA, were rare, as shown by the high level of interest.

“Almost every week we get investors with a good background asking,” he said, although he declined to say whether the bank or its current stakeholders were in further talks to sell a stake in the bank.

Investment fund Leopard Capital announced in July last year that it was competing to acquire a stake in ACLEDA. At the time, Jardines was already in talks with FMO and the bank about a purchase.

Thomas Hugger, executive director at Leopard Capital, said then that the fund was limited to a maximum $15 million investment in any one venture in the Kingdom. However, this was when Leopard was still targeting $100 million in total capital – thus far it has raised about one-third of this original target.

Leopard Capital Chief Investment Officer Scott Lewis said Sunday that Jardines would have looked very carefully at the profitability of other leading banks in emerging markets in the region, and especially those in Vietnam, to price the asset.

“Based on the profitability of banks of similar profile, I would expect it to be priced at a very significant premium to book value,” he said.

ACLEDA Bank recorded net profits of $2.32 million in the third quarter, according to company financial statements, a 72 percent leap on the previous quarter. Total profits for the first nine months reached $6.578 million mean the bank is unlikely to match the $19.4 million in profits before tax recorded in 2008, a record year.

The International Monetary Fund warned this month that Cambodia’s banks are likely to suffer dropping profitability this year as they continue to struggle to lend.

Moody’s considered revising ACLEDA’s rating in May based on the turbulent conditions within the Kingdom’s banking sector and prospects for systemic support; however, in June it decided to keep the bank’s local currency deposit and issuer rating at “Ba1 with a stable outlook” citing the long-term focus of ACLEDA’s shareholders.

Completion may be delayed
Meanwhile, Prom Visoth, ACLEDA’s senior vice president and head of Legal and Corporate Affairs Division, said Sunday that the transfer of FMO’s shares to Jardines might not be complete until the end of January. The three parties involved were in the process of completing the necessary paperwork, he added.

An ACLEDA statement released Thursday said the deal will be completed by the end of the year.

Source: the phnom penh post

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JSH Asian Holdings, a group subsidiary, will purchase the stake from FMO, the international development bank of the Netherlands, in the first change of foreign ownership in

ACLEDA, the Kingdom’s second-largest lender. “Jardines brings ACLEDA more than 175 years of experience in commerce and banking in Asia,” ACLEDA Chairman Chea Sok said in a statement Thursday.

The Hong Kong-based firm will offer its new Cambodian partner expertise and business referrals, added ACLEDA Bank Vice President John Brinsden.

For Jardines – which has stakes in Asia Commercial Bank in Vietnam and merchant bank Rothschilds Continuation – the announcement of the transfer after approval by the National Bank of Cambodia ends years of negotiations in Phnom Penh.

“We believe ACLEDA offers significant growth potential in a country that has a bright future,” said Alain Cany, Jardine Matheson Vietnam group country chairman. “We are very much looking forward to being a supportive shareholder in the coming phase of its growth.”

Although the sum was not disclosed, FMO is believed to have made a substantial profit on its purchase nine years ago. Since then, the bank had injected regular capital through rights issues, said Brinsden, adding that FMO would continue to offer loan support and training. “We feel this is the right time for a major private investor such as Jardines to acquire our stake in ACLEDA,” FMO Chief Information Officer Jurgen Rigterink said in Thursday’s statement.

After completion of the deal, which was expected by the end of the year, Cany will replace FMO’s Joseph Hoess on the ACLEDA board of directors, although Hoess will remain on the ACLEDA Bank Lao Ltd board as vice chairman.

International Business Chamber Chairman Bretton Sciaroni said the deal was a sign that the Kingdom’s financial sector was maturing. “To have come to Cambodia at this point is a vote of confidence in Cambodia and ACLEDA,” he said Thursday. Jardine “made a very good choice”.

ACLEDA is thought to be one of the few banks in Cambodia to have weathered the financial storm that first hit the Kingdom a year ago, resulting in tight liquidity in the first quarter, plummeting profitability and concerns over rising numbers of bad loans across the sector.

The International Monetary Fund warned as recently as last week that the Cambodian financial sector remained at risk, particularly from underreported non-performing loans.

Nevertheless ACLEDA recorded a 72 percent rise in profits in the third quarter, compared to the previous period, as profits after tax jumped to US$2.32 million.

Source: the phnom penh post

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The latest reforms are part of the ongoing ADB second sector program support – which began in 2007 – to assist Cambodia to further develop its financial system.

In statement, Samiuela Tukuafu, Senior Financial Sector Specialist in ADB’s Southeast Asia Department said that “Cambodia has taken many positive steps to develop its financial sector since the instability of the 1970’s and 1980’s, but still faces policy gaps, capacity constraints and other challenges,”

“The ongoing program builds on earlier actions to improve the legal and regulatory environment, to boost sector capacity, to improve disclosure standards and financial transparency, and to build up infrastructure,” he added.

According to the statement, ADB’s loan from its concessional Asian Development Fund has a 24-year term, including a grace period of eight years, with an interest rate of 1% per year during the grace period and 1.5% for the rest of the term. The National Bank of Cambodia is the executing agency for the current program phase which runs from January 2009 to December 2009.

With the achievement of all reform milestones in the third subprogram, a fourth round of measures will be implemented starting in January next year, with the full sector program due for completion in December 2010, read statement.

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According to CMA’s data, non-performing loans (NPLs) declined 1.9 percent over the period to 1.48 percent, or US$8.7 million.

“We have seen the economic situation begin to recover, and people have begun to expand their businesses, so they need capital again,” Hout Ieng Tong, CMA President, was quoted by the Post as saying.

“The slash of interest rates of between 0.2 and 0.5 percentage points by MFIs in early September was also a factor,” said he. He added that interest rates are currently between 1.5 and 2.8 percent per month at MFIs.

During this period, the total loans increased but the number of borrowers was down 14.7 percent to 883,087 down from more than 1 million three months earlier, according to the report.

The report show that CLEDA bank’s outstanding portfolio of small loans was up 5.49 percent to US$172.2 million, while the drop of its NPL ration was from 1.63 percent in 2^nd quarter to zero at the end of the September of 2009.

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“Today, the banking industry is growing both in scope and operations, attracting large foreign banks to open, and the amount of deposits and loans have consistently increased – this reflects confidence from the public in this industry,” he said, encouraging banks to list on the long-awaited Cambodian stock exchange, according to the Phnom Penh Post.

The premier also said that Foreign exchange reserves had climbed 21.48 percent so far this year.

International Monetary Fund (IMF) data shows that reserves reached a record high of $2.594 billion in May after climbing steadily at the beginning of the year from $2.076 billion at the end of 2008, the Post quoted Hun Sen as saying.

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The global financial crisis since October of last year, also plagued Cambodia’s economy such as tourism sector, garment industry, construction sector and real estate as well as Cambodia’s commercial bank sector. Even though, Cambodia’s commercial banks cushioned from the global economic slowdown, because Cambodia’s banking sector is not strongly dependent on international loans and capital market and Cambodia has yet to establish its own stock market.

Speaking at a roundtable discussion on banks and public confidence, which was organized by the Club of Cambodian Journalists on August 26, 2009, Tal Nay Im, National Bank of Cambodia’s Director General said that the bank deposits had increased to almost 29 percent of gross domestic products (GDP) in 2008, up from 14 percent in 2000.

Tal Nay Im also said that Cambodian banking system did not directly suffer from the consequences of the financial crisis, even if Cambodia’s economy is free and open to the world.

While the growth in bank deposits gives banks more liquidity, banks will be able to make more loans to aid the economy. At the mean time, commercial banks also carefully lend loans to bank’s clients because the slow recovery of nation economy makes customers to be facing difficulty for loan repayment on times.

Due to the time of economic turmoil, Cambodians keep their money at home rather than deposit at banks.

The Cambodia Daily quoted Kang Chandararot, executive director of the Cambodian Institute of Development Study as saying that there is no guarantee that the deposits will spawn economic growth, but growth needs the confidence that the deposits represent.

“You have to establish the confidence first before the market can function,” he said, adding that “at this moment it is encouraging, not guarantee.”

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Maybank Olympic branch offers commercial and retail banking services, such as trade finance (letter of credits, trust receipts, bank guarantees…etc), remittances, housing loans, over-draft facilities and SMEs loans.

“This latest branch will offer a range of business and retail facilities to cater to local as well as Malaysian and Singaporean business with interests in the country,” Bernama quoted Abdul Farid Alias, Maybank senior Executive Vice-president and Head of International, as saying.

Maybank opened its first main branch in Phnom Penh of the Kingdom of Cambodia since 1993 with its wide range of products and services, it has become the preferred financier of many Malaysians and Singaporeans owned corporations investing in Cambodia’s infrastructure development and service sectors.

So far, Maybank is operating in 13 countries over the world, including Malaysia, Singapore, Indonesia, the Philippines, Vietnam, China, Papua New Guinea, Brunei, Pakistan, Bahrain, Uzbekistan, United Kingdom and the United States.

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The National Bank of Cambodia is the Central Bank which is an autonomous public entity of a commercial and industrial nature. Its principal mission is to determine and direct the monetary policy aimed at maintaining price stability in order to facilitate economic development within the framework of the Kingdom’s economic and financial policy.

The lack of US dollars flowing through the Cambodian market is because of a major decline in the garment sector, tourism industries and limited agriculture production.

Therefore, commercial banks, licensed money changers and listed businesses would be able to buy dollars from NBC.

In early August, the NBC bought US$2 million worth of riels daily for five days after the local currency hit a low of 4,191 against the greenback during the first week of the month. It is necessary for the Central Bank’s policy to inject foreign currency into the market to stop the devaluation of national currency.

“Given the small market for the riel, this sharp rebound clearly reflects the NBC’s intervention,” the Economist Intelligence Unit’s (EIU) Cambodia economist Danny Richards was quoted by the Post earlier this month as saying.

Neou Seilha, an economist at the Economic Institute of Cambodia was quoted by the Cambodia Daily as saying that the dropping value of Cambodia’s national currency was due to a major slowdown in the garment and tourism industries, sectors of the economy that naturally bring US dollars into Cambodia.

Tal Nay Im said that official exchange rates were determined by the NBC as an average of exchange rates at “five large markets in Phnom Penh”, according to the Post.

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However, the chief executive officers of Advanced Bank of Asia (ABA), Madi Akmambet, and Union Commercial Bank (UCB), Yum Sui Sang, both said their banks were eyeing ways to raise the required capital.

The National Bank of Cambodia (NBC) mandated in September that each bank boost reserve requirments from $13 million to $37.5 million effective from the end of 2010.

Akmambet said the increase was justified to boost stability in the banking sector, but he questioned the timing, given that global credit had tightened considerably since the middle of 2008.

“Since markets have been affected by the global downturn, there might be some obstacles to arranging additional [capital] injections,” he said. “I’m not talking about ABA, but generally. That’s why it would be logical and fair if the deadline were postponed.”

Yum Sui Sang said the global economic crisis had waned in intensity but still posed problems for banks trying to raise additional capital, meaning the central bank should re-evaluate its end-of-next-year deadline.

“We don’t know yet if we can meet the requirement by the deadline, but we have many shareholders, and we have one more year to find the money,” he said.

UCB has $22 million in registered capital, whereas ABA has $23 miliion, the CEOs said.

According to the NBC’s 2008 annual report, just four of the 24 commercial banks registered at the end of last year had $37.5 million in registered capital. These were Cambodia Public Bank, ANZ Royal Bank, ACLEDA Bank and Canadia Bank. There are now 28 commercial banks in Cambodia.

Central bank Director General Tal Nay Im said last week the policy would not change, arguing that it is necessary to ensure that only serious banks set up operations here. “The increase in registered capital is to target bankers without an adequate banking history and influential patronage,” she said.

Akmambet said ABA had a range of options for meeting the requirements, including a cash injection from shareholders, a merger with another mid-level player “if we could see a synergistic result”, or an investment from a strategic partner. “There are a lot of opportunities, and we will choose the best one,” he said.

Lim Loong Seng, chief operating officer and country head at OSK Indochina Bank, said the bank had already increased its capital from $13 million to $25.2 million as of May, and would use capital from its Kuala Lumpur-based parent – Malaysia-listed OSK Investment Bank Berhad – to reach the $37.5 million target.

ANZ Royal CEO Stephen Higgins said there was no reason for the central bank to rethink a “very sensible policy” that would result in stronger banks.

“I believe Cambodia is moving past the worst of the crisis, and by the time this rule takes effect, the bank sector should be in pretty good shape. Also, most customers are already with banks who meet the minimum requirements today, so it shouldn’t be a major issue,” he said.

(The original article is from The Phnom Penh Post)

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