We expect the economic outlook for 2019 to remain positive, with continuation of the strong growth momentum of previous years. This relentless economic growth has been facilitated by the hard work of the Royal Government in achieving and maintaining social, political and macro-economic stability, which is one of the main factors to strengthen investor’s confidence both locally and internationally, and more importantly, the active involvement of private sector as a development partner with the government.
Over the past 12 months, we have faced challenges, for instance, increased NPL in the sector, regulations in relation to the interest rate cap, the credit risk grading and impairment provisioning, determination of the capital buffers of banks and financial institutions plus the deadline of Prakas implementation on lending local currency (KHR) of at least 10% of total loan portfolios, bringing both opportunities and challenges. PRASAC will continue to focus on implementation of its FinTech strategy while growing loan portfolios, its client base and mobilizing sources of funds. In line with increasing regulatory standards locally and internationally, we will also work with our staff and business partners (such as IT systems) to develop more robust compliance frameworks, policies, procedures and processes.
To increase economies of scale and efficiency and maintain strong position, PRASAC will continue to implement the following strategies: i). strengthen our market position and continue expanding our portfolio with growing customer needs and client base; ii). appropriately realign loan pricing and fees to the new regulation; iii). lower operating costs by increasing staff productivity, eliminating unnecessary administration costs, and rationalizing small or loss-making branches, iv). implementing its FinTech strategy and v). mobilizing sources of funds.
Our 2018 results demonstrate that these strategies will continue to deliver success despite challenges, and show how PRASAC continues to bring our strengths and capacities to bear, with the lowest NPL in the sector, high staff productivity, effective cost management, strong client relationships, prudent capital and risk management, and highly engaged staff. We continue building a strong culture, integrity, trust and ethical behavior in all of our businesses; we have a shared pride in our performance; we have a successful history and our footprint is unique among our competitors, which will create long-term value for our stakeholders.
In 2018, PRASAC cemented its position as market leader with the largest branch network, high return and loan portfolio size with a proven record of sustainable growth. Here are some key operational highlights:
- Total assets at year-end were USD2.38 billion, growing 36% percent compared with the end of 2017.
- Total loan portfolio was USD1.96 billion, an increase of 26.67% with a total of 395,000 clients.
- PRASAC maintained its leading position in loan portfolio quality in the sector with Non-Performing Loans (NPL) of 0.7%.
- The deposits outstanding balance reached USD 1.29 billion with a total of 555,000 depositors.
- After-tax net profit increased by 36.76% to USD 78.64 million from USD 57.5 million in 2017.
- Return on Equity (RoE) was 29.4% and Return on Assets (RoA) was 3.8%
- The office network now covers all 25 provinces and capital via 177 outlets, 126 ATMs, and operates in more than 13,966 villages, amounting to 98% of total villages in Cambodia, with a total of 7,600 staff.
- Looking forward, in order to drive our business growth, it will be very different from the past decade due to very high levels of competition. The competitors we are against have generally returned to strength. We are also experiencing increased competition in certain geographies and business segments from new market entrants. Notwithstanding increased competition, we remain well positioned and are making the necessary investments in people, processes and technology to fulfil the needs of new and existing customers throughout our network.
- Alongside our business advancements and changes in technology, are changed client expectations, transforming business models and a redefined competitive landscape. Meanwhile, the regulatory environment for the financial sector will continue to evolve. Our financial strength gives us the flexibility to effectively manage regulatory changes while investing in our businesses growth. We have digitized and simplified processes to lower operation costs, deliver faster services and invest in our technology and innovation to shape the future with new products and services through implementation of the FinTech strategy.
- The financial industry has been subject to increased regulation over the past several years, and we are optimistic that we are through the majority of the changes. PRASAC has been responsive to changes in regulation and has invested considerably to adapt to the new standards. Our liquidity profile is solid and our common equity Tier 1 ratio is strong and complies with regulation. We are confident that, on balance, new regulations have made us a stronger financial institution in Cambodia.
- Continuing to build on a strong foundation
- PRASAC has a great foundation on which to continue to build; we have a strong culture and shared pride in our performance; we have a successful history; and our footprint is unique and coveted by many lenders and stakeholders around the world. Throughout PRASAC, employees place great value on working together and they share a genuine desire to serve our customers.
Bringing the Best of PRASAC to our clients and shareholders
Sustainable growth has been key to PRASAC since its foundation, as reflected in our core values, taking the interests of all our stakeholders into account. We have noticed that an increasing cost efficiency, maximizing benefits and risk mitigation are core values of PRASAC. We are looking for a long-term, customized talent strategy and we continue to build relationships with our customers to deliver value to our shareholders.
Leading through Confidence
While regulatory changes, the interest rates cap, market volatility and increasing competition will pose some challenges, we also see opportunities. We are committed to delivering the right strategy, diversifying products and services, strengthening our culture and staff to drive continued growth and take advantage of changes in the marketplace. What these times have shown us is that our strategies are functioning well. We are more confident than ever that we have chosen the right strategies and have the right people to meet the challenges ahead. As we pursue responsible and sustainable growth, we continue to strive to earn the right to bring our clients and shareholders with us on this journey – leading through these difficult times into the favorable future.
We are confident that our strategy is sound. By executing our strategy well, and making meaningful progress against our focused priorities, PRASAC will be in a good position to perform within the ranges of our medium-term performance objectives and create long-term stakeholder value.
On behalf of PRASAC Management, I would like to thank the management team and staff for their efforts and commitment, the Board of Directors for their support and advice, and the Royal Government of Cambodia, regulatory bodies, the National Bank of Cambodia, and local authorities, who always support us.
PRASAC’s strong performance in 2018 is testimony to the dedicated effort of nearly 7,600 employees. We acknowledge their contribution and thank them for their commitment to our success.
President and CEO