More mergers, acquisitions ahead says banking insiders
Trade war talks between US, Chinese negotiators resume via telephone
MGN Emperor Bank Plc’s launch into Cambodia’s growing financial industry on Sunday has led insiders to believe that fierce competition in the crowded market will lead to more mergers and acquisitions.
In Channy, president and CEO of Acleda Bank, a leading local bank, said the sector will face fiercer competition as credit consumption narrows.
“The banking sector is currently like an orange. Before we used to cut it into eight pieces but now we cut it into 10 pieces. It means market shares are narrower for each bank,” said Channy.
However, he said creating new products will help operators maintain their competitiveness.
“The number of customers remains the same, but the number of banks is increasing, so we need to have more good products for our customers,” he said.
In the first six months of this year, Acleda Bank provided $3.5 billion in loans to 400,000 customers. Some 90 per cent of these were provided to new start-ups or business expansions, said Channy.
National Bank of Cambodia (NBC) figures show that there are 45 commercial banks in Cambodia, 14 specialist banks, 81 microfinance institutions (MFIs), of which seven are microfinance deposittaking institutions (MDIs).
Cambodia Microfinance Association Board of Directors vice-chairman and Vithey Microfinance Plc director-general Bun Mony said more banks and MFIs will be the people’s sources of capital for doing business and for the family’s economic development.
However, Mony said microfinance operators may face losses because they cannot compete with big banks.
“Market shares for MFIs will be weaker. They will face strong competition and may even shut down. Big banks are drawing customers away from MFIs by providing small loans,” he said.
In a prakas issued in 2016, NBC required
all commercial banks, including subsidiaries of foreign banks, to increase their minimum capital to the equivalent of $75 million from the previous $37.5 million.
Specialised banks are required to raise their minimum capital to $15 million, from $7.5 million, while MDIs are required to increase their minimum capital to $30 million – up from $2.5 million.
The NBC requires MFIs, which are not authorised to receive deposits, to raise their capital to $1.5 million or nearly 25 times more than the previous $62,500.
Analysts have said the NBC requirement will likely lead to more mergers in the sector.
Ngeth Chou, the senior adviser at Emerging Markets Consulting and a financial expert, said the stronger competition will lead to mergers among the banks and MFIs which cannot compete in the market.
He said mergers are a good strategy to prevent risks in the sector, which currently faces tough competition.
Sathapana Bank Plc transitioned from an MFI to a commercial bank in April 2016 by merging with Japanese-owned Maruhan Japan Bank Plc.
However, Channy said that at this stage, there are no signs of risk seen in the sector that will require mergers.
“There is no risk, nonperforming loan ratios are still low,” he said, adding that the banking sector’s nonperforming loan ratio was just two per cent last year.
Approximately 1.14 million Cambodians applied for consumer loans as of the end of March this year – up 5.3 per cent from the end of December – with a loan portfolio of $6.7 billion or up 7.4 per cent, said the Credit Bureau of Cambodia.
NBC last year confirmed that lending in the Kingdom’s financial industry – at both banks and MFIs – amounted to $24.5 billion by the end of last year, a 19 per cent increase from the end of 2017.
However, Channy claims that as operators focus on “world-growing” digital services, more options become available for consumers.
He said more banks and MFIs will make it more convenient for credit consumers to invest and expand their businesses.
“Credit users will feel happier, and there’ll be more banks and more sellers, so they will have competitive interest rates,” he said. TOP US and Chinese negotiators held phone talks on Tuesday as the world’s top two economies seek to resolve their trade war, more than a week after they declared a truce.
Talks had broken down in May over US accusations that Beijing had reneged on its commitments, and the dispute escalated with the two sides exchanging steep increases in punitive tariffs.
But US President Donald Trump and Chinese leader Xi Jinping agreed to revive negotiations when they met on the sidelines of the G20 summit in Japan on June 29.
US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer spoke with Chinese Vice Premier Liu He and Commerce Minister Zhong Shan on Tuesday.
White House economic adviser Larry Kudlow told reporters the talks “went constructively” but it was “too soon for details”.
In an interview with the Fox Business Network, Kudlow described the discussions as “preliminary” and said meetings will “probably” be arranged, but did not give more details.
Kudlow noted that Trump has agreed to hold off on imposing new tariffs and will allow certain US products to be sold to Chinese telecom giant Huawei.
“Having said that, we have a very strong – I want to underscore this – a very strong expectation that China will really shortly, maybe immediately, begin to purchase US agricultural products,” he told the US broadcaster.
The Chinese commerce ministry said in a brief statement that the two sides exchanged “opinions on implementing the consensus reached between the two countries’ heads of state in Osaka”.
Washington and Beijing have hit each other with punitive tariffs covering more than $360 billion in two-way trade and those duties remain in place.
After his meeting with Xi in Osaka, Trump said he would refrain from imposing tariffs on more Chinese products. He had previously threatened to put punitive duties on an additional $300 billion in Chinese exports.
He also triggered a backlash in the US Congress by agreeing to soften some US export restrictions on components to Huawei, though Trump stipulated that officials would take care to avoid creating new risks to US national security.
The US had imposed tough sanctions on the company, whose equipment US officials fear could be used as Trojan horses for China’s intelligence services.
The ceasefire comes as the US presidential campaign has started ahead of the November 2020 election.
Asked about speculation that Beijing may be waiting to see how the race plays out, Kudlow said it “would be a very big mistake on their part”.
“I think that kind of thinking would probably do great damage to these trade talks,” he said.
But he suggested that the US was in no hurry to finalise a deal.
“Speed is not an issue, quality is the issue,” Kudlow said. “And so I make no forecast on that and reiterate this view. There’s no timetable, none of that stuff.”