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Logo of Phnom Penh Post newspaper Phnom Penh Post - Waking up from a 20-year slumber

Kamalkant Agarwal, head of International Banking Business of Siam Commercial Bank
Kamalkant Agarwal, head of International Banking Business of Siam Commercial Bank, talks to the Post on Wednesday afternoon in Phnom Penh. Vireak Mai

Waking up from a 20-year slumber

Cambodia’s banking sector has come under fire recently after a report from investment firm Mekong Strategic Partners revealed a very low return on equity for the majority of the countries banks. One of those identified as seriously underperforming was Cambodian Commercial Bank. The Post’s Hor Kimsay sat down with Kamalkant Agarwal, head of international banking business at Siam Commecial Bank – the parent company of Cambodian Commercial Bank – to talk about the bank’s performance and its future growth strategy this week.

A recent report on Cambodia’s banks identified Cambodian Commercial Bank as one of the poorer performing banks in the country based on a low return on equity. What is your response to this?
When we talk about return on equity, we also need to look at the return on assets. We put in a lot of capital. We have not grown our balance sheet in Cambodia so far, so our return on equity is low because we have put in more capital. But as our business grows and we book more on the balance sheet, our return on equity will improve. If you look at the return of equity [in our bank] for the past two years, it is already improving. And in next two or three years, it will improve even more because now we are growing the business so that we are using our capital better.

My reaction is that yes, it was low because we were not fully using our capital. But we are now starting to use our capital by doing more business in Cambodia. Our return on assets will improve. If you look at our return of equity in 2013 or 2012 or 2014, we are better already. And in 2015 and 2016 will be better still.

What strategies are you applying that give you confidence the bank will grow?
Cambodian Commercial Bank is a 100 per cent owned by Siam Commercial Bank, the leading bank in Thailand. It has been operating in Cambodia for 20 years. The business is primarily what we call corporate banking or the wholesale banking business.

I have to accept that we have been quiet in Cambodia for the past 20 years. But in the past year or two, we have revisited our business strategies in Cambodia and now we are thinking to improve our system and our people, in order to better grow our business in Cambodia.

We are starting to do many things. In addition to installing ATMs in our own branches, now we are installing our first ATMs outside the branches. Now we have the system to equip ATMs and foreign exchange booking. We also plan to launch online banking in the next 12 months. Our business will grow and we will add more clients with more lines of services. We also injected additional capital. All the actions we are doing in Cambodia are aimed toward growing the business in Cambodia. Now we are serious, we really want to do it and expand our business in Cambodia.

Is it too late to start expanding your business in Cambodia when leading banks have gained a foothold?
We are late, but I don’t think we are too late. I think Cambodia will grow more in the future. I talk to many companies and in the future there will be much more growth to come. We have missed something, but it is still not too late. We have a lot of growth to capture in the future.

Other Thai banks like Kasikorn Bank and the Bank of Bangkok have announced plans to invest in Cambodia. How do you think this will affect to your business?
Surely, they will be our rivals. But we are competing with them everywhere. We are competing with them in Thailand. We have a branch in Laos and K Bank just opened in Laos and we didn’t leave. We maintain our commitment to the country. Once we go in, we don’t leave. We just started launching ATMs and now we have six ATMs – five are in the branch and one is at Royal Phnom Penh Hospital.

Analysts say that mergers and acquisitions are inevitable and will help to strengthen an overcrowded industry. What are your thoughts on that?
Every market is going to have consolidation. If you go to Singapore, Malaysia or Thailand, such models are already appearing to avoid from high cost in banking operation. We need big scale, so for the small banks it is really difficult to earn profits. The central bank is also encouraging consolidation. We can see in Vietnam, they just announced seven or eight banks will be taken over by big banks.

So, consolidation is good. For us, we are still small in Cambodia. We need to become bigger. We can consider acquisition, but right now we are too small. We want to grow first and in three years, we can then consider it.

What do you foresee for Cambodia’s banking industry this year?
I think the outlook of the banking industry directly links to the economy. If you look at the Cambodian economy, the country is doing quite well. It has been growing more 7 per cent annually and I think 2015 will remain the same. I have met many clients and they all have growth plans. So, I realize that the banking industry has also growth.

But I think the profit margins are under a little bit of pressure because competition is increasing. We have some pressure on the margin, but the volume will grow.

Edited for length and clarity.

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