The bank’s NPL rate – counted as loans the borrower has defaulted on for three months – rose to 6 percent from 5.56 percent in the last quarter of 2009. Lending remained at US$105 million each quarter.

“We’re still cautious in evaluating clients for loans, and it’s currently hard to get a good client with a good business plan,” FTB General Manager Gui Anvanith said last week. “We’ll dare to lend as much as $50 million if it’s a good business project.”

The FTB has witnessed a huge turnaround in its non-performing loans from 2008, when it had the highest NPL rate in Cambodia at 32 percent. By the end of 2009, that rate had been cut to 5.56 percent, surprising bank managers themselves.

Like other banks in the Kingdom, FTB is maintaining high liquidity, with $168 million deposited in the central bank at the end of last year.

FTB is focusing on business ventures, small and medium-sized enterprises and agricultural businesses, rather than real estate developments, Gui Anvanith said.

“We have little appetite for hotel-development projects,” he said. “For those in [Phnom Penh], we might consider them, but those in Siem Reap, we say no, as the province is too crowded with hotels.”

The bank is avoiding other real estate projects, such as apartments, with tens of thousands of units built and many unable to find buyers, he said.

Deposits at the FTB rose 1.7 percent, to $230 million, quarter on quarter, and the bank posted a first-quarter net profit of $1.38 million.

Stephen Higgins, CEO of ANZ Royal Bank, said business conditions for banks have been improving so far this year.

“First-quarter performance has been strong at [ANZ Royal], with revenue more than 20 percent higher than for the first quarter last year,” he said.

Higgins expects his bank to comfortably surpass results for 2009, when the bank’s NPL rate nearly doubled to 5 percent.

Cambodian banks and lending institutions saw their NPL rates rise after the global economic downturn, as borrowers abandoned projects and payments.

The National Bank has said the rate of NPLs is not of great concern, as it has remained below 10 percent of all outstanding loans.

Source: the phnom penh post

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“Lending growth has picked up recently after a very substantial slowdown through most of 2009,” John Nelmes, IMF resident representative, wrote in an email Friday. “Lending growth of between 15 and 20 percent in 2010 would be in line with a modest recovery in economic activity and a reasonable increase in loan demand.”

Cambodian banks put restrictions on their lending in the fallout from the global economic crisis, but they have continued to compete for depositors.

Loan growth grew just 3.2 percent to US$2.42 billion in 2009, up from $2.34 billion the year before, according to National Bank of Cambodia figures. Deposits rose 32.7 percent to $3.28 billion in the same period.

Deposit growth is likely to slow as banks back away from competitive offers that have created too much cash and forced them to make large deposits in the National Bank at low interest rates, Nelmes said.

“This negative spread – the difference between what banks pay for deposits and what they earn on them – is undermining profits,” he said.

“That situation cannot continue indefinitely, so looking forward, I would expect to see deposit interest rates decline, and deposit growth slow,” he said. “At the same time, lending rates may not fall very much, as banks look to rebuild their profit margins.”

Yum Sui Sang, CEO of Union Commercial Bank, whose clients are mostly garment manufacturers from Hong Kong and Macau, said the bank has seen an increase in borrowing demand.

“Lending growth will definitely increase this year but I cannot predict the increase percentage,” he said, adding that demand for loans remains low.

Union Commercial was seeking to reduce its cash by dropping a percentage point on deposit rates, to 6.5 percent, he said, but the bank still wants to attract more depositors.

“Even though we are too liquid, we’re still willing to attract more deposits, as it is the blood of the bank for the long-term goal,” he said.

Dieter Billmeier, vice president of Canadia Bank, told the Post this month that the bank had $200 million in deposits at the National Bank at the end of 2009 and that borrowing demand had climbed from October 2009 into February 2010. Canadia Bank expects growth potential of 15 percent to 20 percent over 2009, he said.

National Bank Director General Tal Nay Im said Sunday that bank lending would depend on an economic recovery.

“We have seen gradual lending growth since the start of the year, but it’s still too early to predict,” she said. “If the economy recovers well, the capital demand for production will increase as well.”

At the end of 2009, commercial surplus liquidity reached $900 million. High liquidity can drive down loan rates, when banks want to turn their assets into profits, but it can also lower deposit rates as they seek to balance profit margins.

Tal Nay Im predicted an increase in depositors in 2010, as more people realise the advantages of bank accounts.

Source: The Phnom Penh Post

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Khieu Kanharith, Information Minister and government spokesman, told reporters during a press conference that Cambodia accepts $1.2 billion pledged in 14 different agreements during a ceremony hosted at the Council of Ministers by Prime Minister Hun Sen and Vice President Xi Jinping.

China has donated more than $2 billion in various loans and aid to Cambodia from 1992 until recent agreements. But before a signing ceremony, Beijing had offered $930 million in low-interest loans and financial aid to Cambodia since 1992.

Totaling 14 different agreements of loans will be given for economic development and soft loans for the construction of roads, transport infrastructure, communication equipment and irrigation projects.

Other agreements include a soft loan for an electricity transmission loop line around the capital to be built by China National Heavy Machinery Co, and economic and technical cooperation with an interest-free loan of 50 million yuan ($7.3 million), along with another grant of the same value – also for technical assistance – although their exact use was not specified, according to the Phnom Penh Post.

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The money has been made available through the bank’s Asian Development Fund (ADF), which received a $400 million boost Tuesday as part of a much broader $3.4 billion fiscal spending package approved by the bank’s directors, the Phnom Penh reported.

According to the Phnom Penh Post, The ADF resources are intended to finance key development investments in those low-income countries that are among the most fiscally constrained in responding to the crisis.

ADB Country Director for Cambodia Arjun Goswami was quoted but the Phnom Pen Post as saying that the Cambodian government was currently determining which sectors most needed the additional economic stimulus to offset the impact of the economic crunch. “We haven’t gone through the list yet to nail down exactly which ones.”

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