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As the CEO of ANZ Royal, Leonie Lethbridge will focus on steady, organic growth. Photo supplied

New ANZ Royal CEO talks value creation, managing risk

Leonie Lethbridge has only been at the helm of ANZ Royal for three months, but she has already hit the ground running at the bank known for revolutionising Cambodia’s financial market following its inception in 2005.

The Australian-born chief executive has spent the best part of two decades working in Asia’s banking sector; first in Indonesia, and most recently in Shanghai. While Lethbridge is adept at taking on senior roles in new cities, she is also aware of what it takes to be an effective leader in the ASEAN region.

“The ability to understand how cultures work is really important, as a leadership aspect and as a client engagement aspect,” she told Post Supplements.

“Relationship is really important in building trust that enables you to add value. I think Cambodia is a market that does value relationship and trust a lot.”

“As it gets to the commercial end of the conversion, you want to build the kind of relationship where clients will trust you to understand and disclose aspects of their business. They trust you that you will use that information to provide them with the insights that they are looking for and the capital they are looking for.”

ANZ Royal, which today has 15 branches in the Kingdom, is a joint venture (JV) between Australia and New Zealand Banking Group Limited (ANZ), which boasts a market cap of around $55 billion, and local conglomerate the Royal Group of Companies. Ten months after announcing the JV and declaring itself open for business in 2005, ANZ Royal attracted more than US$31 million in deposits and opened accounts for over 1,300 customers. To date, the company has US$900 million in deposits and counts 60,000 as customers.

Reflecting on some of the micro and macro developments that have impacted on Cambodia’s financial sector during those intervening years, Lethbridge said the growth of the industry had been exponential.

“The market has certainly become much broader since we came in, with many more regional players and domestic players entering the market,”she said.

“Also, there’s a level of north Asian capital that has entered the market which I think is actually really quite interesting.”

“Whether this has come through the microfinance institutions or whether it’s come through banks or whether it’s come through MFIs becoming banks, the level of particularly north Asian capital coming into the market has expanded greatly.”

Lethbridge largely attributed the growing influx of north Asian capital to Cambodia to the fact that Japan’s economy was currently running on negative interest rates, meaning Japanese capital was looking further afield for notable returns.

With a large number of commercial and specialised banks operating in a relatively small, but burgeoning market, some market commentaries have suggested the industry is ripe for merger and acquisition activity. When questioned on this, Lethbridge said ANZ welcomes growth of the banking sector.

“It’s important that there is a diversified and competitive financial services sector,” she said.

“Access to capital can really be a constraint in the development of an economy. So whether it’s through banks or whether it’s through MFIs, it’s really important to have a diversified banking sector because the ability to raise funds is really important.

However, Lethbridge cautioned that it was not enough to simply have a growing number of banks in Cambodia.

“I think the Cambodian banking sector is well-managed but it’s important you are always thinking about what could go wrong, and that’s what capital is about so I think it’s very important that there is adequate capitalisation of the financial sector here,” she said.

Lethbridge said ANZ Royal is already “extremely well-capitalised”, adding that 2018 is in no way problematic for the bank to meet the newly introduced doubling of capital requirements to $75 million. According to National Bank of Cambodia’s 2015 annual
report, ANZ Royal made a net profit after tax of $18.5 million in the 12 months to the end of 2015, while its cash on hand stood at $212.5 million.

Discussing some of the prevailing fundamental risks ANZ Royal are keeping a close watch on, Lethbridge said credit risk is constantly under scrutiny.

“When you are operating in an emerging market you are always focused on credit risk,” she said.

“It’s terrific that access to capital has increased in Cambodia, but it’s just really important that it doesn’t get overdone and the risk doesn’t get underpriced.”

“I think there is some risk and that risk is being underpriced and particularly that relates to long tenures. So, long-term deals. The question is, is a fifteen-year deal being priced properly to reflect the risk as you would price it in any market?”

In addition to monitoring credit risk around long-dated deals, ANZ Royal counts a lack of transparency within financial reporting a concern.

“Cambodia would benefit from better financial statements,” Lethbridge said. “That would allow better access to capital if there was better transparency in financial statements and I think that’s something where we are looking to work with our clients to improve that. It’s potentially a source of credit risk as well.”

In addition, Lethbridge said Cambodia needs a concerted strategy around debt-capital markets.

“There is value and there would be value in having a long-term debt capital market here, meaning that corporate can borrow and raise funds directly by issuing bonds,” she said.

“And that corporate bond market would be helpfully underpinned by the sovereign issuing the bonds because that would allow some price discoverability.”

While there will be some murky waters that Lethbridge will need to navigate as the chief executive of one of the biggest banks in a country which is currently boasting a robust seven per cent growth rate, Lethbridge retains a glass half-full approach when it comes to building upon the long-term success created by her predecessors.

Her optimism bodes well for the company as it gears up for more organic growth solution in the short to medium term.

Going forward, Lethbridge said ANZ Royal’s strategic direction would be underpinned by value-adding.

“Strategically, we’re thinking about the way the world is going. The convenience of digitisation is being recognised and appreciated more and more. The innovations that we introduced a long time ago are increasingly valued by our clients so we will continue to grow out in that space,” she said.

“We will also continue to invest in the market in a way that gives us a return on our capital, but in a way that is also valued by clients, so I see it largely as an organic approach.”

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