Bad loans rising, says NBC

Photo by: Nguon Sovan
National Bank of Cambodia Director General Tal Nay Im said Wednesday that NPLs are rising but would not exceed 10 percent.

The Phnom Penh Post
Thursday, 27 August 2009
Nguon Sovan

Nonperforming loans reached 5.2pc by June and could rise close to 10pc in the coming months, National Bank of Cambodia Director General Tal Nay Im warns.

NONPERFORMING loans at commercial banks rose to 5.2 percent by the end of May, up 1.8 percentage points from the beginning of the year, National Bank of Cambodia Director General Tal Nay Im told the Cambodian Club of Journalists on Wednesday.

The increase came as borrowers struggled with repayments amid declining cashflow in the wake of the global financial crisis, she said, adding that the central bank was not overly worried by the defaults.

"This is the only major concern for the National Bank of Cambodia at the moment regarding Cambodia's banking industry," Tal Nay Im said.

"But the NPL ratio is quite low, and it is acceptable for banks in Cambodia."

She projected that NPLs would fall again as the global economy regained health. In the meantime, the central bank anticipated that NPLs could close in on 10 percent but would not pass this benchmark this year or next.

Her comments come a week after the NBC released its 2008 annual banking supervision report, which showed NPLs at 3.7 percent of total outstanding loans at the end of last year, up from 3.4 percent a year earlier.

The absolute value of NPLs climbed to US$87.44 million at the end of 2008 from $52.95 million a year earlier. The total value of loans soared 54.7 percent from $1.51 billion to $2.35 billion.

The report also showed that 15 of 24 commercial banks had no NPLs as of the end of 2008, a situation described by some people in the sector as unlikely. Another four had NPL ratios under 4 percent, according to the report.

That situation has now changed, Tal Ny Im said: "Last year, some banks had zero NPL ratios because they did not have bad loans when we audited them, but since the start of this year all the banks have NPLs."

ACLEDA Bank's NPL ratio was listed in the NBC annual report at 0.2 percent. However, ACLEDA President In Channy said the bank's NPLs were actually 0.44 percent of outstanding loans at the end of the last year and had increased to 1 percent, largely as a result of loans to large-scale businesses in the construction-materials sector.

"However, it is still at a good level," he said.

Gui Anvanith, director general of the Foreign Trade Bank, told the Post last week that NPL ratios at his bank dropped to 17 percent as of July this year from 28 percent at the end of last year. The central bank recorded its bad loans at 32 percent, up from 30.7 percent a year earlier.

He said he expected the rate to drop to between 7 and 10 percent at the end of 2009.

Tal Nay Im said deposits at all commercial banks - of which there are now 27 in the Kingdom - have increased 11.1 percent year on year to $2.9 billion as of June this year.

Loan disbursements were up less than 1 percent to $2.4 billion, she added.