SMBC buys stake in Cambodia's biggest bank
Finance Asia | 18 August 2014
Sumitomo Mitsui Banking Corp. (SMBC) has acquired 12.25% of Cambodia’s
largest bank by assets, Acleda, furthering the Japanese bank's expansion
into Southeast Asia, the two banks said on Monday.
SMBC, the main lending arm of SMFG, paid more than Y10 billion ($97
million) for the stake in the Phnom Penh-headquartered bank, according
to a person familiar with the matter. The megabank bought the stake from
the International Finance Corporation (IFC) and will become its top
shareholder when the deal closes in September.
Founded in 1993 Acleda
has grown from being an NGO into a microfinance institution and is now
tapping SMBC to help it develop corporate banking services to overseas
clients in neighboring countries such as Myanmar, Vietnam and Laos.
“SMBC can help us grow to the next level and we will combine forces to expand in the Mekong region,” said Acleda’s president & group chief executive In Channy during an interview with FinanceAsia.
The world looks set to become even more reliant on Japanese capital in
the coming years. As Prime Minister Shinzo Abe’s economic stimulus
package loses steam the banks are redeploying their record profits and
ample yen liquidity -- $2 trillion worth of deposits in the first
quarter of last year -- into faster-growing economies than their
sluggish and over-crowded home market.
SMFG said on May 14 that it would become an Asian-centric institution
over the next decade after announcing that its overseas loans rose Y3
trillion year-on-year to Y15.2 trillion.
SMFG is the first among its megabank peers to make an equity investment
in Cambodia. It opened a Phnom Penh representative office in February
2012, as it looked at ways to tap into the Kingdom's fast-growing
economy. Cambodia’s economy has been growing at a clip of about 7% to
8%.
Acleda said it has a domestic market share of about 20% in deposits to
22% in loans. SMBC will have one board seat in Acleda out of nine.
Japanese banks have been following their clients to Cambodia as wages
have risen in China and other Southeast Asian countries. Acleda already
provides services such as fund transfers and payroll services to around
90 Japanese companies such as: Ajinomoto, Aeon and Yamaha.
SMBC is not Acleda’s only Japanese shareholder. Orix bought a 6% stake
in 2013 and has helped Acleda learn about leasing and auto financing.
Corporate lending usually has thin margins, but Acleda is looking to
provide a full suite of services to its clients. “We want to make sure
we are their bank in all segments,” said In Channy.
SMBC has been deepening its relationship with Acleda since 2012. It
signed a memorandum of understanding for a business alliance with Acleda
in August 2012 and then in January this year it started helping the
Cambodian bank develop foreign corporate clients.
SMBC has obtained approval from the National Bank of Cambodia for the
investment. Foreign banks can own up to 100% of Cambodian banks, unlike
in many other Southeast Asian countries where there are strict caps on
ownership.
Regional expansion
Acleda has been expanding in the Mekong region since 2008. “Laos,
Cambodia and Myanmar have similar economic conditions and those
countries need a bank like Acleda, so we see a great opportunity to
capture market shares and have new customers,” said In Channy.
“We want more room to grow in international markets,” said In Channy.
It does not have a full banking license in Myanmar as yet.
IFC, part of the World Bank, has invested in Acleda since 1999, when
the bank changed from an NGO into a microfinance institution.
“They have spent a long time with us, so it was time for them to move on,” said In Channy who introduced IFC to SMBC.
However In Channy noted they will still retain some links with the bank
he noted. IFC provided Acleda with equity capital, tier-2 capital
sub-debt, long-term financing, and trade finance. IFC also helped Acleda
expand into Laos and Myanmar and remains a shareholder in Acleda’s unit
Acleda MFI Myanmar which finances Myanmar’s micro, small and medium
enterprises.
“We will continue to support Acleda Bank’s operations in Cambodia, Lao
PDR, Myanmar, and other countries in the region,” said Adel Meer, IFC’s
financial institutions group manager for East Asia and the Pacific.
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