Cambodia’s NPLs ‘manageable’ amid rising interest rates

• May 30, 2023

The possibility of banking and financial service consumers’ failures to make required interest or principal repayments on debts has been manageable for banks and microfinance institutions (MFIs) respectively in Cambodia even though the credit default indicator increased in 2022 compared to the previous year, an NBC report said.

The annual banking supervision report issued by National Bank of Cambodia (NBC) pointed out that the Non-Performing Loan (NPLs) ratios—borrowers’ failure to make repayment—in banking and microfinance industries has increased to 3.1 percent and 2.5 percent in 2022 from 2 percent and 2.4 percent respectively in the previous year.

The Banking Supervision Report 2022 further pointed out that Vietnamese bank Saigon Thuong Tin Bank (Cambodia) Plc or Sacombank and Thai banks Cambodian Commercial Bank (CCB) and Bangkok Bank Public Company Limited (Bangkok Bank) have the highest NPL ratios among commercial banks operating in Cambodia.

However, the report stated that Sacombank and Bangkok Bank’s NPL ratios have fallen one percent and 3.9 percent to 15.6 percent in 2022 from 11.3 percent respectively in the previous year, while that of CCB and RHB Bank (Cambodia) Plc—another commercial bank—has increased to 12 percent and 10.1 percent from 4.4 percent and 4.6 percent respectively.

“The ratio is at a level that is manageable,” the report pointed out, adding that Asia-Pacific Development Bank Plc, Branch of Kasikorn Bank Public Company Limited (Phnom Penh), Chip Mong Commercial Bank Plc and MB Bank (Cambodia) Plc are the four commercial banks whose NPL ratios have been at the lowest levels between zero percent to 0.2 percent.

The annual banking supervision report also indicated that the NPL ratios of the three commercial banks dominating Cambodia’s banking market including Acleda Bank, Advanced Bank of Asia Limited and Canadia Bank have risen to 2.7 percent, 3.1 percent and 4.1 percent in 2022 from 2.1 percent, 1.1 percent and 3.4 percent in the previous year respectively.

“The banking system in the country has maintained its resilience, strength and trust from both local and foreign through the efforts made by the [central bank] in participating with the government to release necessary measures to prevent and reduce impacts at a maximum level,” the report pointed out, adding that the system consists of 58 commercial banks.

However, the report went on to say that the NPL ratio of some specialised banks in Cambodia has stayed remarkably higher—up to 71.9 percent in 2022—than the highest levels in the commercial bank category, while more than a majority of the specialised banks have faced rising NPL ratios at different pace.

According to the report prepared by NBC’s Directorate General of Banking Supervision, the NPL ratios of Angkor Capital Specialized Bank, Evergrowth (Cambodia) Specialized Bank and Maritime Specialized Bank have increased to 71.9 percent, 45.8 percent and 34.3 percent in 2022 from 61.1 percent, 41.5 percent and 11.4 percent respectively in the previous year.

In the microfinance sector, the NPLs ratio for microfinance deposit-taking institutions (MDIs) has stayed unchanged at 1.4 in 2022 compared to the previous year even though that of four MDIs have increased, while one of them has gained a falling one, said the report.

Mohanokor, AMK, LOLC (Cambodia) and Amret have been MDIs whose NPLs ratios have risen to 3.7 percent, 3.6 percent, 2 percent and 0.5 percent in 2022 from 1.1 percent, 3.1 percent, 1.6 percent and 0.3 percent respectively in the previous year, while that of Prasac Microfinance Institution has fallen to 1.2 percent from 1.5 percent.

Among the non-MDIs in the microfinance sector, the NPLs ratios of Piphup Thmey Microfinance, Rolya, Jet’s Cash Box Finance, Vivath Golden Finance and Asia Pacific Finance have increased to 72.6 percent, 58.3 percent, 58.3 percent, 55.9 percent and 50.2 percent 2022 from 62.5 percent, 56.7 percent, 47.5 percent, non-available and 17.9 percent respectively.

The report stated that the interest rates charged by banks on credits in riel and US dollar have increased to 12.2 percent and 10 percent per annum in 2022 from 11.4 percent and 9.7 percent per annum respectively in the previous year, while the interest rates for deposits in riel and US dollar have risen to 6.8 percent and 5.4 percent from 6.2 percent and 4.7 percent respectively.

The interest rates charged by MFIs on credits in riel and US dollar have declined to 15.2 percent and 14.4 percent per annum in 2022 from 16.8 percent and 15.9 percent per annum respectively in the previous year, while the interest rates for deposits in riel and US dollar have risen to 9.2 percent and 8.5 percent from 7.1 percent and 7 percent respectively, the report said.

Source: https://www.khmertimeskh.com/501298784/cambodias-npls-manageable-amid-rising-interest-rates/