KEY POINTS:

  • Only five of 43 banks earned an acceptable ROE of 15% or more in 2013.
  • Return on Equity in the Cambodian finance sector fell significantly during the GFC. While MFIs are back above 20%, average Bank ROEs are low at just 11%.
  • ​Excluding the big four banks, the average ROE was just 6%.
  • While competition is a factor, the bigger issue is lack of scale for many banks, and further consolidation is needed in the sector.
  • Achieving an acceptable ROE is clearly proving a challenge for many banks. The situation however can be remedied provided the causes of underperformance are addressed.

While the Cambodian Bank sector continues to experience high growth, of the 43 banks in Cambodia in 2013, just five earned an acceptable return on capital (above 15% ROE) with the remainder effectively destroying value for their shareholders. The overall sector ROE was just 11.6%, well below the 22% achieved by the MFI sector. Outside of the big four banks, average ROE was a very disappointing 6%.

RESEARCH REPORT:
Cambodian Banks: High Growth Opportunity vs Low ROE Conundrum