Bank blames 54 percent drop to $1.34m in second quarter on delayed loan repayments and stricter lending practices
AN increase in the volume of loans not repaid on time and greater lending caution led to a 54 percent drop in second-quarter profits at ACLEDA Bank, President and CEO In Channy said Monday.
Unaudited quarterly financial statements released by the bank last week showed profit after income tax dropped 54 percent to US$1.34 million over the second quarter from $2.91 million in quarter one of this year.
"The profit drop is due to our restrictions on loan disbursements," In Channy said. "As a result of the economic downturn, business activities are not good, so we are vigilant over lending. Eighty-eight percent of our revenue is from interest rates, and when we disburse fewer loans, revenue is also lower."
However, the financial statements show income from interest declined just 1.76 percent from $23.86 million in quarter one to $23.44 million in the second quarter as total loans and advances to customers outstanding dropped from $450.25 million to $440.44 million. At the end of 2008, the bank had $463 million in outstanding loans, In Channy said.
Interest payments increased from $6.61 million to $7.4 million over the same period as deposits grew from $494.5 million to $573 million.
In Channy said that writedowns on loans not paid on time were a significant factor in the drop in profits.
The bank's figures show that provisions for loan losses grew from $236,348 in quarter one to more than $1.1 million in the quarter ended June 30. In Channy said the provisions were for late payments and did not mean the loans were in default. However, he acknowledged that bad debts had risen from 0.44 percent at the end of last year to 1 percent at the end of June.
In Channy said he expected profits to rebound in the second half of the year as the bank increased loans to customers ahead of the planting season.
"Usually, in the first half of the year, we earn only one-third of our profit," he said.
ACLEDA Bank posted profits of $19.45 million for the full year 2008, $10.37 million from the first half of that year, financial statements show.
Union Commercial Bank President and CEO Yum Sui Sang said Monday that his bank's profits had also dropped in the first half of the year as a result of reduced lending and increased competition.
"For the first half of the year, UCB earned $1.6 million profit - 45 percent down from $2.9 million in the first half of last year," he said.
Phan Ying Tong, country head of Cambodian Public Bank, said first-half profit figures were not available, but that he expected a drop because of reduced business activity among clients.