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Despite challenges, Hong Leong Bank had a fairly solid 2020, says CEO Joe Farrugia


Hong Leong Bank (Cambodia) Plc’s CEO talked to Khmer Times about the bank’s performance, its emphasis on digital banking as a niche market segment and to rising competition. The following are excerpts of the Q and A.

KT:  2020 was a difficult year in terms of overall business climate due to the effects of COVID-19 and the prevailing economic headwinds. Could you kindly enlighten us on the steps which your bank has taken to circumvent these headwinds and how has it fared overall and in specific terms such as finance, NPL, loan restructuring, expansion, HR aspects and related activities?

JF: Yes, 2020 certainly had its challenges for the industry. However, we have had a fairly solid performance. Our loan book continued to grow at 10 percent with year on year (YoY) deposit growth of 28 percent  Our NPL is extremely low at around 0.2 percent, which I believe is well below the industry average.

In terms of loan restructuring, we provided support to our customers where necessary with total restructuring at around 2 percent of our loan book as at the end of December.


KT:  Did the pandemic impact HLB’s expansion program or was the plan maintained and executed?

JF: Even though we knew the pandemic would have an impact on the banks’ performance, we continued with our digital and branch expansion plans in line with our five-year strategy as we still need to provide our customers the best products and services to remain competitive within a saturated market.


KT:  What percentage of the bank’s business portfolio is in the SME sector, followed by corporate banking, real estate and personal banking, especially priority banking?

JF: Our main focus is in the SME market. It represents just over 50 percent of our total asset book followed by the retail sector at around 40 percent, with the remaining 10 percent in the corporate space.

Our retail customer focus stretches from tech savvy young millennials to our affluent Priority Banking customers.

KT:  Have these exposures been maintained for this year or will they be adjusted to suit prevalent needs and business environment?

JF: Cambodia is still very much an emerging economy and has seen rapid economic progress over the past decade so we continue to adjust as required to meet the needs of our customers and provide a high level of customer service and satisfaction.


KT:  How do you foresee this year’s activities for HLB and what are the steps put in place to face current headwinds and any shifts in the economic or business conditions in the country?

JF: The overall outlook for the economy appears positive for 2021 with a GDP forecast of around 4 percent. Hence, we expect to continue to focus on moving forward with our ongoing plans to roll out new products and services.

We have an extremely strong and committed team who are very customer focused and who adapt well to all conditions in this ever-changing economic environment. I’m confident we will remain on track and continue the journey to deliver sustainable growth through-out the medium to long-term.


KT:  What impact does the digital banking segment in your bank have and has it matched your aspirations?

JF: With our focus being digital at the core, our banking systems and operations are central to the bank’s strategic outlook and continue to develop at a rapid pace.

We have a number of digital enhancements to our mobile banking platform planned for this year {which will} soon to be released. Among these are our corporate internet banking platform which we are very excited about.

With our existing digital offerings, we aim to drive our overall growth in terms of customer acquisition and revenue generation well into the future.


KT:  What have been your most challenging periods during your tenure with HLB and how did you mitigate them?

JF: Like any green-field project, its always a challenge to build up business momentum from day one. Having said that, we did break even around 18 months ahead of schedule. Building on our momentum and with the support of years of experience from head office, we have continued to journey in line with our long-term strategic objectives.


KT:  How many branches do you have and what is the plan until 2025? How do you retain your talent pool in the face of new banks springing up regularly?

JF: Currently we have seven branches, in key locations across the capital city. Given our focus towards digital expansion, our aim is to invest heavily in this space in order to meet the demands of our customers. That said, we will continue to look at any locations that would require a branch presence in order to meet our customer requirements.

In terms of our talent pool, we pride ourselves on being one of the best employers in this market, which is reflected in a low attrition rate that sits at below 10 percent YoY compared to the industry average of above 20 percent. We pro-actively train and develop our people, creating a highly skilled and loyal workforce well prepared to take on more senior roles within the bank.


KT:  What is the financial strength of the bank in terms of capital, deposits versus loans, restructured loans against NPL or regular loans which did not need restructuring?

JF: As I mentioned earlier, our NPL is extremely low at 0.2 percent and our restructured loans sit at 2 percent, well below industry average.

Like all commercial banks, we also meet the regulatory requirements on paid up capital and continue to grow both loans and liquidity in line with our long-term strategy.


KT:  How do you envision the Cambodian banking sector as new players are poised to enter the market and in the face of some commercial banks not having international correspondent banks?



JF: The reality is the Cambodian banking sector is already over-crowded and we continue to see new players entering the market. Having said that, the market continues to grow. I see this as a positive as it keeps all the banks aligned and focused on rolling out new banking products and services to ultimately meet the needs of customers. Eventually, we will reach a saturation point and yes there will be a strong likelihood of consolidation across the industry. That can only be a good thing for consumers and businesses alike as it will bring a high level of confidence and expertise to the industry.


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