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Logo of Phnom Penh Post newspaper Phnom Penh Post - The state of the nation’s banking

The state of the nation’s banking

CEO TALK
Han Peng Kwang


Malaysia-based HwangDBS Commercial Bank Plc launched in Cambodia one year ago. Its country head, Han Peng Kwang, sat down with the Post to discuss its burgeoning business and the state of the Kingdom’s banking industry.

Your bank has been in the Kingdom for a year. How has business been?
HwangDBS Commercial Bank opened its doors amid the global financial crisis. Though it was certainly challenging, we have had some opportunities, allowing us to record a considerably lower-than-expected pre-tax loss of US$0.77 million with total operating revenue of $0.44 million [last year].

Naturally, we started with building up our deposits by offering attractive rates. As at 31 July 2010, our total deposits stand at $19.3 million and outstanding loans at $3.8 million.

As a newer entrant to the market, how will HwangDBS build its customer base?
I believe that there is tremendous room for growth given that the Cambodian economy is still young, and there is a large percentage of the local population that are still wary of banks or have limited access to such facilities. Most banks are located in urban cities, whilst over 80 percent of the population lives in the countryside.

What are some of the opportunities and challenges the bank sees in the Cambodian banking industry at the moment?
The main challenge for us is our network. We have only one outlet at the moment.

The other major challenge is competition, given that there are currently 28 banks in Cambodia competing for the same piece of the pie.

HwangDBS CB differentiates itself through our service and our commitment to provide convenient, fast and efficient banking services to our customers.

If our customers are not able to come to us, we will go to them. To address the challenge of network and reach we are planning to open another two branches in Phnom Penh by end of this year and to look into the possibility of joining an ATM network with other banks.

The Kingdom also has interest rates that are generally much higher than most of the rest of the world. Does this effect your operations? What are the interest rates the bank offers in term of loan and deposit?
This is the cost of doing business in a developing country. To be competitive, we have to structure our products competitively by identifying the needs. Whilst the deposit rates are high, the loan rates are even higher. Currently our deposit rate for our Savings account is 1 percent per annum.
Our fixed deposit rates range from 1.75 percent to 3.25 percent depending on the tenure.

Having said that, high rates are a norm, but you can see that the rates have also been falling compared to a few months ago. I believe they will continue to fall gradually in the next three to five years as the economy develops, locals become more affluent and the market efficiency improves along with the development of a sustainable credit market.

Domestic savings will also need to improve as Cambodia is currently an exception to the rule where Asian economies are often characterized by high domestic savings. By increasing the money supply in the banking system, the interest rates or the cost of borrowing should fall.

Coming from Malaysia, what have you observed regarding Cambodian perceptions of borrowing and depositing money compared to Malaysia?
There is definitely a big difference, both in terms of the perception and habits. Malaysia has been privileged to have experienced peace, which allowed their economy to develop and prosper. The banking system is fairly developed, and almost every Malaysian has at least one or more bank account. There is no fear of a bank going bankrupt or closing.

What about the sector in Cambodia?
The banking sector in Cambodia is still fairly young.

Many Cambodians still harbour distrust towards banks after a few closed and many lost their life savings in the late 1990s. As such, money is still kept in homes, where it is unsafe.

The younger generation is more receptive towards the idea of putting money in banks and is starting to see the benefits and convenience of doing so.

As more gain employment, they will eventually open a bank account, start saving, own a credit card and apply for loans to purchase a motorbike, car and even a house. In term of borrowings, we noted that more and more Cambodians now understand the benefits of borrowing.

Cambodia now has a huge number of commercial banks (28) and will reach 30 by the end of this year as CIMB and Bank of China set up shop.

The National Bank of Cambodia in late 2008 regulated the commercial banks to triple its registered capital to $37.5 million by the end of this year,
what is your opinion on this issue?
This is natural for a developing economy as the government understands the importance of attracting foreign capital investment. What will happen eventually is that the banking sector will consolidate. The strong will become stronger, and the weaker banks will eventually be absorbed or will eventually close.

On our part, HwangDBS CB will be increasing the number of bank branches over the next three years, and at the same time we will be increasing our paid-up capital to $37.5 million from $30 million before the end of this year.

All these, I believe, [are] strong proof of our commitment to doing business in Cambodia.

Interview by Nguon Sovan

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