Madi Akmambet, executive director of the board of ABA bank.
In an exclusive interview with The Post, the executive director of the board of ABA Bank, and a former CEO, Madi Akmambet explains the bank’s growth in Cambodia.
What makes ABA stand above other banks in Cambodia?
We have more than 50 banks here in Cambodia and many of them are trying to differentiate themselves from one another. From this perspective, ABA stands quite differently. Being a subsidiary of the National Bank of Canada, ABA is the only North American bank in Cambodia.
Our other differentiation points are distinctive branding and modern branch design.
We are also continuously innovating both in products and business processes. ABA’s speciality is in 12/7 over-the-counter service availability, round-the-clock customer support channels and the flagship ABA Mobile application.
We believe all this together with our competitive product offering and highly skilled staff brings a huge difference to the overall customer experience. However, most importantly, ABA’s uniqueness comes from inside. The bank’s Board of Directors is mainly represented by French and Canadian people.
The executive management team is very diverse, consisting of people from Kazakhstan, Uzbekistan, Nepal, South Korea and Canada. Of course, Cambodian top professionals are on board too, playing a vital role in running our organisation. This fusion makes ABA unique, and special in terms of corporate culture, core values and execution capabilities.
ABA is also special when it comes to its mission of serving Cambodians and benefiting the country, because we give this paramount importance when doing business.
Having said that, at this time we are also conscious of the fact that ABA, along with other banks and financial institutions, has a significant role to play in helping Cambodian people and companies to get through the current Covid-19 crisis.
Under the guidance and regulations of the National Bank of Cambodia, the banking sector should keep working to support the economy. From this viewpoint, ABA is already positioned to help lead the way because of its financial resilience, international standard best practices and commitment to the local economy.
What segment is driving ABA’s business in the local market? How is the retail banking segment performing?
ABA has an exclusive business strategy with two key business arms. The first focuses on retail individuals when it comes to deposits, money transfers and other account management banking services. This sector is performing exceptionally well. The total number of accounts almost doubled last year and reached more than one million, with around 98 per cent of that for retail customers. The second is lending, with the strategic focus on microbusiness and small- to medium-sized enterprise [MSME] clients, who form 92 per cent of our total loan portfolio.
ABA’s deposit portfolio rose to $3.4 billion, while the loan segment touched $2.8 billion. How was this achieved?
It is our vision to be the bank that Cambodians trust to take care of all their personal and business banking needs. So we create and deliver products and services that are needed here in Cambodia. We have a strong sales team, an extensive branch network and a state-of-the-art digital banking platform. All this provides us with full “omni-channel” capabilities to serve our clients.Overall, the key success factor is the focus on customer needs. We bring our customers value by creating beneficial, reliable and innovative financial services. With that in mind, we share our customers’ success as partners.
Could you share with us how the bank manages its non-performing loans?
We have a rigorous credit appraisal process, including financial analysis and site visits by the bank’s loan officers. The key here is to understand customers’ businesses and identify how exactly ABA can help them to achieve their business goals.
Debt can be a double-edged sword – it can be beneficial but can also be financially challenging. So we at ABA vigorously pursue only economically productive loans that add value to a customer’s business. We position ourselves as a partner to our borrowers, and we track how we fulfil this mission.
Through a market survey we found that 92 per cent of our borrowers confirmed that ABA loans helped them reach their business goals.
Another eight per cent did not fully succeed due to their poor planning or unfavourable market conditions, meaning it was not because of the bank, but as a result of other reasons. This meant that the Non-Performing Loans ratio stood at 0.7 per cent as of the end of last year, which is much better than average in the banking sector.
How does ABA reach out to the unbanked population?
ABA has been opening new branches every year since 2008. Today, we have established 77 branches across Cambodia, having a presence in almost every province.
On top of that, we have an extensive network of around 2,000 terminals, including ATMs, Cash-in Machines and POS [points of sale].
We have more than 6,000 staff, and our loan officers can reach customers even in remote areas up to 50km away from the branch. We have clients not only in cities and towns, but also in districts and villages. We cooperate with money transfer agent services such as Wing and TrueMoney, whereby our customers can use their countrywide agent network to deposit and make payments to ABA accounts.
Likewise, their customers can use our branch network and digital solutions to top up their e-wallets.Overall, banking services penetration is growing very fast. According to National Bank of Cambodia 2018 data, the deposit penetration of banks reached 40 per cent and almost doubled in the previous three years. We believe ABA contributes a lot to financial inclusion in Cambodia.
How has been the growth last year in terms of profits and revenue?
Last year, ABA showed a record high profit. Net income constituted $127 million, up 72 per cent compared to the end of 2018. As a result, the Return on Equity ratio (ROE) was 33 per cent in 2019, which is the highest in the industry.
What are the hot-selling banking -products in Cambodia at present?
As mentioned, when lending, ABA focuses on credit to the MSME sector, which is the main pillar of the Cambodian economy. We also open thousands of new accounts every day, thus providing financial inclusion. Those who have an account can benefit from the full service, which includes a savings account or fixed deposit, money transfers and bank cards, as well as many other offerings. Digital banking is in high demand with our exclusive ABA mobile app, internet banking platform, and self-banking kiosks across the country.
How has your growth story in the Kingdom been since the bank started operations?
Though Advanced Bank of Asia originated in 1996 as a local commercial bank, a new phase began in 2007 when a private equity firm from Kazakhstan, Visor Group, and its partner DamirKarassayev acquired this single-branch bank with assets of just $40 million. With the acquisition came a period of significant investment in the bank in terms of IT and infrastructure.
The bank was reborn as ABA in 2009 when we rebranded and launched new products in the market. The core of the current management team has been established since then.After first turning a profit in 2010, the bank has been growing non-stop.
In 2014, the bank opened a new chapter in its history with the National Bank of Canada becoming a shareholder, gradually acquiring 100 per cent (minus one share) of ABA. Now ABA is part of the National Bank of Canada Group, and this comes with ever-stronger levels of financial strength, corporate governance, and market positioning. Total assets of ABA as of the end of last year reached $4,395 million, or more than 100 times of that when we took charge.
ABA's total assets reached $4.4 billion in 2019. What contributed to these figures?
The total assets of the bank are contributed to by shareholders' capital for around 11 per cent and customers' deposits for 77 per cent. The rest is borrowings and other liabilities. This is a typical funding structure for a commercial bank and in line with the solvency requirements of the National Bank of Cambodia.
How has been the growth last year in terms of profits and revenue?
Last year, ABA showed a record high profit. Net income constituted $127 million, up 72 per cent compared to the end of 2018. As a result, the Return on Equity ratio (ROE) was 33 per cent in 2019, which is the highest in the industry.
As a foreign bank, how has ABA contributed to Cambodia's financial sector?
Being one of the top banks and the only North American bank in Cambodia, we continue to introduce many best practices in terms of corporate governance, risk management and compliance control. We also innovate continuously and bring new products to the market. ABA was a pioneer in Cambodia, for example, in bringing in a full-scale mobile banking solution, an e-Cash cardless cash withdrawal service and QR code payments, among others. So we very often do not just meet demand, but also create new demand.
Having a reliable and highly reputable shareholder, National Bank of Canada means that ABA has easier access to capital and funding. Last year, we received $50 million in shareholders capital and $40 million in subordinated debt to support the growth of ABA in Cambodia. In Q1 this year, we received an additional $120 million in paid-up capital.
We also have a “B+” credit rating from the Standard and Poor’s internationally recognised rating agency, which is among the highest in Cambodia. Our parent bank has an “AA-” international credit rating. All this helps ABA to borrow from foreign banks and international financial institutions, which means attracting more investments for Cambodia.
Last but not least, we contribute a lot to the country by "creating" more and more Cambodian banking and finance professionals. To that end, we established a dedicated ABA Training Centre a few years ago, where training is provided regularly to all our staff. It helps to increase human capital capacity in the banking system and the country overall.
Last year ABA issued bonds worth $21 million. Was the corporate exercise successful and what were the funds used for?
Yes, we are delighted with the results of the bond issuance and deem it successful.
The bond has been a significant milestone for ABA as well as for the Cambodian capital market. It became the first bond from a commercial bank listed on the Cambodian Securities Exchange and the first Cambodian bond with the international rating from S&P. What is more, ABA became the first issuer of corporate bonds to retail investors in addition to institutional investors.
Among buyers of the bond, 92 per cent are from the retail side, and most investors are Cambodian. It shows people's confidence in the bank and their readiness to invest in Khmer riel (KHR).The bonds were issued in the national currency to fund our lending in KHR. This also helped the bank achieve the target set by NBC policy, whereby a minimum 10 per cent of total loans are denominated in KHR by the end of last year.
Besides, any listing on the stock exchange requires higher transparency, specific reporting and additional financial audits. It means higher financial discipline, so to speak.Overall, we believe that the ABA bond contributes to the development of the capital market and will bring even more trust in this sector.
What are your views and plans for 2020?
When we discussed the business plan for this year back in December, the economy was already expected to gradually slow down due to the weaker demand for Cambodian goods and the partial withdrawal of the EU’s EBA [Everything But Arms] programme, as well as a decrease in tourism.
Yet we projected ABA to grow in 2020 by around 30 per cent in terms of assets, loans and deposits, versus 50-60 per cent in the past few years. We also planned to open two to three new branches this year. However, with the Covid-19 outbreak, the business environment has changed considerably. We are regrouping to anticipate a significant decline in the economy in 2020, as we see many businesses are being affected. As you know, last month,the National Bank of Cambodia issued a circular allowing commercial banks to provide grace periods and loan repayment restructuring to customers who have been affected by Covid-19.
And we have already started offering support to our borrowers accordingly.It is going to be a challenging year, but we look forward with confidence. We have all the resources in place to continue supporting Cambodian businesses, including with funding, branch network and technologies. We also strongly believe in the Cambodian economy. It is diversified, competitive, and open for investment, and it is thus well positioned to grow again sooner rather than later.
