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Cambodian Banks: High Growth Opportunity vs Low ROE Conundrum

Updated: Jun 16

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%.


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.


> Download the report:

Bank Sector ROE Conundrum
.pdf
Download PDF • 263KB

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