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Canadia Bank cuts NPL rate in half

Canadia Bank cuts NPL rate in half

Unaudited results show bad-loan rate declined to just under 5pc last year, vice president says.

CANADIA Bank cut its rate of non-performing loans (NPL) to below 5 percent last year, said Vice President Dieter Billmeier, after hitting 11.1 percent in 2008 as the bank became overexposed to Cambodia’s struggling property sector following the global economic crisis. Overall net profit fell 15 percent, he added.

According to unaudited results for 2009, Canadia managed to cut its NPL rate by more than half from the $45.5 million recorded the year before, when the International Monetary Fund (IMF) warned of rising bad loans along with a lack of openness and supervision within the banking sector.

“We just recovered some loans [repaid late] last year and we have been more prudent like all the banks with loans in 2009,” said Billmeier ahead of audited results due in the coming weeks.

The bank remained confident of keeping the NPL ratio at about the same level this year, he added, although Canadia was working towards a target of 4 percent or below as its risk-management committees worked to monitor key ratios and financial performance.

At the start of April, Billmeier told the Post that Canadia had recorded an NPL rate of just 2.35 percent in 2008, a discrepancy that was not immediately explained by the bank.

At the start of 2009 the IMF accused lenders in the Kingdom of underreporting bad loans, though it did not name specific banks.

Billmeier said last year that Canadia had attributed additional reserves to its burgeoning bad loans following the economic crisis.

Canadia Bank recorded the second-highest level of NPLs in Cambodia during 2008, according to a National Bank of Cambodia (NBC) banking supervision report. Foreign Trade Bank (FTB) endured a staggering 32 percent NPL rate in 2009, or $27.6 million, and ANZ Royal saw bad loans rise to 2.6 percent, or $6.4 million, by the end of 2008.

Gui Anvanith, FTB’s general manager, said Friday that audited financial results would be finalised by the end of March, declining to release unaudited figures.

“We worked hard last year and it paid off, so the trend is favourable,” he wrote in an e-mail referring to FTB’s bad-loan rate. “And in certain instances, even if the client has recovered, we still do not recognise a full recovery just in case 2010 may result in a slow recovery – so we are managing our portfolio very conservatively.”

Stephen Higgins, CEO of ANZ Royal Bank, did not reply to repeated emails late last week.

Although Canadia slashed its rate of bad loans last year, profits still fell, the bank’s unaudited results showed.

The lender recorded a 15 percent drop in net profits last year to about $18.7 million, Billmeier said, citing the effects of the economic crisis, from a reported $22 million the previous year.

“Even though it dropped ... we did quite well last year if compared to other financial institutions,” he said.

Last year bank lending dropped about 4 percent to $375 million from $390 million in 2008, and deposits rose 22 percent to $560.5 million from $460 million in 2008, he added.

“We were too liquid at the end of last year – our liquidity deposited at the NBC was about $200 million – [this is] very strong liquidity.... We are preparing to look into the loan market more favourably again,” said Billmeier.

Analysts forecast there may be as much as $1.5 billion in liquid assets in private hands in Cambodia, he said, predicting, therefore, that deposit rates would continue to rise at a rate of between 10 to 15 percent per year.

Minister of Economy and Finance Keat Chhon said at the beginning of last month that private banks in the Kingdom held about $900 million in reserves with the central bank.

Borrowing started to rise in October, Billmeier said, a trend that continued into the first two months of this year.

“We see a potential growth rate [in lending] of 15 to 20 percent compared to the end of 2009, carried by agriculture, the services sector, wholesale and retail, and import and export,” he said. “We also see a return of confidence in the housing market; therefore, demand for housing loans from ... end-users will also grow.”

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