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President & Group Managing Director's Report

"We will continue to heavily invest and set highest priority of the numerous successes in digital transformation, accomplished over the past decade. Consequently, we aim to deliver enhanced customer experiences, provide them the convenience to manage their banking needs, and reduce the cost of transacting. We believe our customers would love the opportunity to transact or manage their banking needs on their own at anytime and anywhere of their choice.
The next logical endeavor for the Bank would be Artificial Intelligent/Big Data Analytic. We are expanding and upgrading our IT systems to handle the huge—but silo—data sets, accumulated over many years with the goal to achieve smart or targeted advertisement, marketing and sales; plus countless value-added opportunities. We believe this would further reinforce our position as a leading, the most popular and reliable commercial bank in Cambodia for retail or corporate customers, and business partners both locally and internationally."

Performance in 2022

Competitive Environment

Ongoing impact of the global supply chain issues and the war in Ukraine has led to the rising global oil, food prices, and high inflation in the Globe. The largest economies and developed countries have consecutively increased the interest rate to curb the high inflation. It causes the upward trend of funding cost during the year and coming period.

Bank/Financial Institutions (BFIs) in Cambodia face fierce competition to use various marketing channels, promotional strategies, pricing methods, etc. Customers have eased to access finance, good leverage, and better financial literacy.

The mobile banking application (Mobile App.) shows its popularity and competitiveness, in the digital era, with about two-third (2/3) of banks launching their App. ACLEDA Mobile is a leading one with registered users/partners over 2.85 million. Customers can use ACLEDA Mobile worldwide where available WiFi/internet, scan KHQR/QR within Cambodia countrywide, and cross-border payment with QR in Thailand.

Operational Highlights in 2022

• Total loans outstanding at the end of 2022 were US$6,421.65 million, of which US$1,392.11 million (or 21.68%) was lent to the agriculture sector. In 2021, lending to agriculture was US$1,101.54 million. By the end of December 2022, there were 453,014 active customers for the Group’s small business loans.
• Non-performing loans (NPL) remained at a controllable rate of 2.90%, given the COVID-19 crisis.
• Total deposits were US$6,388.99 million from around 3.87 million active accounts.
• The Group posted a profit for the period attributable to owner of the Bank US$181.74 million.
• The Bank continuously made efforts to minimize costs and risks in order to maximize income.
• The Bank is focusing on further developing the electronic banking infrastructure to offer its customers a wide range of the products and services to manage their financial resources.

Retail and Small Business

Lending in the "Small" business category grew by 16.89% or US$414.62 million. The "Personal & Others" category grew by 29.66% or US$60.08 million. "Housing Loans" balance were US$182.93 million. The total amount of loans outstanding was US$6,421.65 million as of the end of 2022.

The Group’s deposit balance were US$6,388.99 million (increased by 11.77% or US$672.97 million) and the total number of accounts was around 3,865,749. The retails sector accounted for the largest segment of the Bank’s growth in deposits with a large percentage coming from first-time depositors: employee payrolls paid through the Bank’s Payroll Service and non-bank customers in rural areas using E-Wallet ACLEDA mobile App. Financial products and services via FinTech solutions have contributed to this strong growth.

The Group maintains a diversified infrastructure of choices with 318 traditional branches (or offices), and 125 self-service banking with 1,200 ATMs and 4,358 POS terminals. It's interesting to note that the Group has issued a total of 1.80 million debit cards. Moreover, the digitized ACLEDA mobile App has proved very popular, registered by more than 2.85 million users at the end of 2022.

Medium and Corporate Businesses

In this products category in 2022, Cash management increased substantially through our arrangement with the public sector, particularly the Social Security Fund, government payroll direct deposits, and vehicle stamp tax collection. Demand for payroll services were particularly strong in 2022 with a number of organisations signed up, including entities in the public sector, and local and international companies. They provided excellent opportunities for cross selling of other products.

In addition, the best services offer with nationwide networks of the Bank have highly attracted and engaged the medium and corporate business entities to prioritize the Bank as the first coordinator for financial management and sources of their business operations and settlement. These multiple services have also had the significant positive impact on the Bank's local currency cash flow and have enabled the Bank to entirely fund its local Khmer Riel currency loan portfolio. Meanwhile, the medium and corporate loans outstanding further grew by 17.87% compared to 2021 and accounted for 39.04% of the total loans outstanding.

Furthermore, the Bank and its subsidiaries continued to collaborate with their long–term, experienced, and strategic partners. These entities assist our mutual common customers to manage their financial resources effectively and efficiently. At the same time, this collaboration helped boost revenue while enhancing long-term sources of funds for the Bank. These partnerships significantly contributed to the Bank’s long-term funding. The joint efforts also provided a useful source of off-balance sheet revenue, while enhancing the international expertise of the Bank’s management and staffs.

Treasury and International

The Bank is a leading bank in offering Foreign Exchange (FX) service to all sectors and the public at large. Earnings from this type of service continued to grow and made a valuable contribution to our non-interest income. Based on its risk management policy, the Bank does not take positions for speculative trading, on its FX business. It is created to support customers' businesses only. It is a low risk that the Bank is able to manage its open position at a certain prudent ratio to comply with both internal and regulatory limit. It is considered as a stable source of income, which has grown consistently over time, producing good margins, and helped to build up long-standing relationships with customers and partners.

The Bank's balance sheet was strengthened and supported by robust inflows of customer deposits and long-term borrowings to support a healthy loan growth during the year, which provided a solid financial structure to support the overwhelming growth of Bank’s business and market operations.

The Bank contributed to the promotion of the use of Khmer Riel (KHR) by providing local currency loans to customers, amounting to more than 14% of its total loan portfolios, exceeding the regulatory requirement of 10%.

To support its long-term sources of funding, the Bank diversified its funding options by maintaining and gradually expanding good relationships with its strategic partners globally, especially in Europe, the USA and Asia.

he Bank continued to strengthen relationships with other financial institutions and review our substantial international correspondent networks during the year. At the end of 2022, the Bank had 262 correspondent banks residing in 45 countries. In addition, the Bank has a dominant market share in terms of accounts from local banks and financial institutions, and we provide fund-transfer services to them throughout the country.

The Bank managed to comply with all of its internal risk policies, regulatory requirements, and lenders' prudent covenants.

Strategic Priorities for 2023

1. Prioritize Mobile and Maximize Digitalization, including National Payment Hub (NPH), Partners and ASEAN Payment Network Integration and Global Collaboration.
2. Human Resource Digital Transformation and Employees Welfare for Long-term Sustainable Growth with Multi-expertise and Digital Workplace.
3. Minimization of Workflow Process by Using Digital Files-Documents through Digital Platform for Financial Products and Services.
4. Remodelling the Physical Branch Offices and Branding Strategy to Build ACLEDA Community.
5. Data Lakehouse for real-time processing of streaming data, algorithmic analysis and AI engine development aiming to achieve smart marketing, useful insight, successful product development, early fraudulent activity detection and superior customer services.
6. Build a first-class IT services to support the Bank business strategies while protecting information assets with the best and latest technologies.
7. Strengthen the Position as a Leading Listed Company on the Cambodia Securities Exchange (CSX) for Both Debt and Equity Securities.
8. Ensure that ACLEDA Bank Plc.'s subsidiaries form an integral part of digital banking and their services.
9. Inclusive Partnerships with Potential Institutions for Business Growth.
10. Environmental, Social and Governance (ESG) Assessment, Framework of Guidelines and Commit to the Concept of Triple Bottom Line (People, Planet, Profit).

The Challenges for 2023

The Bank, as a listed company, is accountable to two regulators: the NBC and the SERC. It is also accountable to the public at large and to individual investors. Over its history, the Bank has created trust from its good corporate governance, the rich experience of our management team, and a culture of transparency.

Digital infrastructure and FinTech products narrow the gap of finance and financial service access. These will eliminate distances within the financial market and enable customers to make choices between banks and financial institutions irrespective of their location. They will also stimulate strong competition in both service quality and pricing. "ACLEDA mobile" was fully upgraded. The look and feel is appealing to all ages. It has been built with customers’ experiences and user-friendliness in mind. Moreover, it is highly secure and downloadable at any spot where there is Wi-Fi or internet available, providing a mechanism to place the Bank ahead of the competition.

Year 2023 still faces some challenges, but Cambodia is in a far more economically positive place with ongoing infrastructure development and healthier sector outlooks, fuelled by the Regional Comprehensive Economic Partnership (RCEP), relevant Free Trade Agreement (FTA), and China’s relax travel restrictions to be announced. The publics see the importance of the first SEA Games and the 12th ASEAN Para Games to be hosted by Cambodia in May and June 2023 respectively.

Due to rising global demand, foreign investors’ confidence, and a full reopening of Cambodia’s borders, the Kingdom was anticipated to see uphill economic growth in 2023. However, COVID-19 variant(s) pandemic still affect some parts of the world, but less engender public fears. The slowdown of China’s economy amid the impact of Zero-Covid-19 policy which was announced to be relax travel restriction in early 2023 – a potentially vital economic step for the region. Inflation in 2023 could face uncertainty due to the protracted Russia-Ukraine war and global economic variability. Given the slowdown in the global economy with slowing food prices, inflation in Cambodia is projected at downward trend.

To all our customers, my colleagues on the Board of Directors, management and staff, stakeholders, the Royal Government, the NBC, and the SERC, I offer my sincerest thanks for your support in 2022 and in anticipation of a happy and prosperous 2023.

Dr. In Channy
President & Group Managing Director of ACLEDA Bank Plc.
March 22, 2023.