CORPORATE MISSION
To Sustain the Position of Being the Most Efficient, Profitable and Respected Premier Financial Institution in Cambodia.
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Efficient . Profitable . Respected
2016 Annual Report 1 CONTENTS
1 CORPORATE MISSION
4 CORPORATE INFORMATION
6 BRANCH NETWORK
14 CORPORATE PROFILE
15 FINANCIAL HIGHLIGHTS
16 SIMPLIFIED BALANCE SHEET
17 SUMMARY OF THREE-YEAR GROWTH
18 BOARD OF DIRECTORS
20 BOARD OF DIRECTOR’S PROFILE
26 CHAIRMAN’S STATEMENT
31 POLICY AND PRACTICE GUIDELINES FOR CORPORATE GOVERNANCE
37 BUSINESS OPERATION TARGET
41 ANALYSIS OF THE FINANCIAL STATEMENTS
43 REPORT OF THE BOARD OF DIRECTORS
49 INDEPENDENT AUDITORS’ REPORT
52 CONSOLIDATED BALANCE SHEET
53 CONSOLIDATED INCOME STATEMENT
54 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
55 CONSOLIDATED STATEMENT OF CASH FLOWS
56 SEPARATE BALANCE SHEET
57 SEPARATE INCOME STATEMENT
2 2016 Annual Report 58 SEPARATE STATEMENT OF CHANGES IN EQUITY
59 SEPARATE STATEMENT OF CASH FLOWS
60 NOTES TO THE FINANCIAL STATEMENTS
139 CALENDAR OF SIGNIFICANT EVENTS 2016
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2016 Annual Report 3 CORPORATE INFORMATION
Board of Directors
Non-Executive Chairman Tan Sri Dato’ Sri Dr. Teh Hong Piow
Non-Executive Co-Chairman Dato’ Sri Lee Kong Lam
Executive Director Mr. Phan Ying Tong
Director Dato’ Chang Kat Kiam
Director Mr. Quah Poh Keat
Director Dr. Ghanty Sam Abdoullah
Director Dato’ Mohammed Najeeb bin Abdullah
Joint Company Secretaries Dato’ Chia Lee Kee Mr. Ong Ming Teck
Auditors Ernst & Young (Cambodia) Ltd. 3rd Floor, SSN Centre No. 66, Norodom Boulevard Sangkat Chhey Chumneas Khan Daun Penh 12206 Phnom Penh Kingdom of Cambodia
4 2016 Annual Report Head Office
Campu Bank Building No. 23, Kramuon Sar Avenue (Street No. 114) Sangkat Phsar Thmey 2 Khan Daun Penh Phnom Penh Kingdom of Cambodia Telephone : (855) 23 222 880 / 222 881 / 222 882 Fax : (855) 23 222 887 SWIFT : CPBLKHPP E-mail : [email protected] Website : www.campubank.com.kh
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2016 Annual Report 5 BRANCH NETWORK
BRANCHES IN PHNOM PENH
Phnom Penh Main Ground & 1st Floor, Campu Bank Building No. 23, Kramuon Sar Avenue (Street No. 114) Sangkat Phsar Thmey 2 Khan Daun Penh Phnom Penh Kingdom of Cambodia Telephone : (855) 23 214 111 / 217 686 / 223 182 Fax : (855) 23 217 655 E-mail : [email protected]
Boeng Trabek No. 432, Preah Monivong Boulevard (Street No. 93) Sangkat Tonle Basak Khan Chamkar Mon Phnom Penh Kingdom of Cambodia Telephone : (855) 23 989 310 / 989 311 / 989 312 / 989 313 Fax : (855) 23 989 314 E-mail : [email protected]
Boeng Tumpun
Street No. 371, Tnaot Chrum Village Sangkat Boeng Tumpun Khan Meanchey Phnom Penh Kingdom of Cambodia Telephone : (855) 23 901 140 / 901 141 / 901 142 / 901 143 Fax : (855) 23 901 144 E-mail : [email protected]
6 2016 Annual Report Chbar Ampov No. 16, National Road No. 1 Sangkat Chbar Ampov 1 Khan Chbar Ampov Phnom Penh Kingdom of Cambodia Telephone : (855) 23 997 976 / 997 977 / 997 978 Fax : (855) 23 997 975 E-mail : [email protected]
Chroy Changvar No. F01 & F02, National Road No. 6, Sangkat Chroy Changvar Khan Russey Keo Phnom Penh Kingdom of Cambodia 7 Telephone : (855) 23 432 301 / 432 302 / 432 303 / 432 304 Fax : (855) 23 432 305 E-mail : [email protected]
Mao Tse Toung No. 294, Mao Tse Toung Boulevard (Street No. 245) Sangkat Tomnoubteouk Khan Chamkarmon Phnom Penh Kingdom of Cambodia Telephone : (855) 23 987 293 / 987 294 / 987 295 / 987 297 Fax : (855) 23 987 296 E-mail : [email protected]
Monivong No. 541Eo & 543Eo, Preah Monivong Boulevard Sangkat Boeng Keng Kang Ti Pir Khan Chamkar Mon Phnom Penh Kingdom of Cambodia Telephone : (855) 23 992 630 / 992 631 / 992 632 Fax : (855) 23 992 633 E-mail : [email protected]
2016 Annual Report 7 Olympic No. 267, Preah Sihanouk Boulevard Sangkat Veal Vong Khan 7 Makara Phnom Penh Kingdom of Cambodia Telephone : (855) 23 222 860 / 222 861 / 222 862 Fax : (855) 23 222 863 E-mail : [email protected]
Olympic Market No. 370 E0, Street No. 193 Sangkat Olympic Khan Chamkarmorn Phnom Penh Kingdom of Cambodia Telephone : (855) 23 988 560 / 988 561 / 988 562 Fax : (855) 23 988 563 Email : [email protected]
Phnom Penh Special Economic Zone No. A2, National Road No. 4 Phnom Penh Special Economic Zone Sangkat Kantok Khan Posenchey Phnom Penh Kingdom of Cambodia Telephone : (855) 23 729 311 / 729 312 / 729 313 Fax : (855) 23 729 315 E-mail : [email protected]
Phsar Doeumkor No. 281, Mao Tse Toung Boulevard (Street No. 245) Sangkat Phsar Doeumkor Khan Toul Kork Phnom Penh Kingdom of Cambodia Telephone : (855) 23 996 118 / 996 119 Fax : (855) 23 996 120 E-mail : [email protected]
8 2016 Annual Report Phsar Kandal No. 129, 131 & 133, Street No. 144, Sangkat Phsar Kandal 2 Khan Daun Penh Phnom Penh Kingdom of Cambodia Telephone : (855) 23 988 300 / 988 301 / 988 302 / 988 303 Fax : (855) 23 988 304 E-mail : [email protected]
Preah Sihanouk Boulevard No. 128 E0, Preah Sihanouk Boulevard (Street No. 274) Sangkat Boeung Keng Kang 1 Khan Chamkarmon Phnom Penh Kingdom of Cambodia 9 Telephone : (855) 23 998 091 / 998 092 / 998 093 Fax : (855) 23 998 094 E-mail : [email protected]
Steung Meanchey No. 6A & 7A, Chom Chao Street (Veng Sreng) Damnak Thom Village Sangkat Steung Meanchey Khan Meanchey Phnom Penh Kingdom of Cambodia Telephone : (855) 23 969 601 / 969 602 / 969 603 / 969 604 Fax : (855) 23 969 606 Email : [email protected]
Street 271 No. 26, Street No. 271, Trapaing Chhouk Village Sangkat Tek Thla Khan Sen Sok Phnom Penh Kingdom of Cambodia Telephone : (855) 23 969 610 / 969 611 / 969 612 / 969 613 Fax : (855) 23 969 614 E-mail : [email protected]
2016 Annual Report 9 Tek Thla No. 7.9.11 E0-E4, Street No. 110A Sangkat Tek Thla Khan Sen Sok Phnom Penh Kingdom of Cambodia Telephone : (855) 23 995 202 / 995 203 / 995 204 Fax : (855) 23 995 205 E-mail : [email protected]
Toul Kork No. 150 F2A, 150 F2B, 150 F2C, Street No. 289, Group 52 Sangkat Boengkak 1 Khan Toul Kork Phnom Penh Kingdom of Cambodia Telephone : (855) 23 992 481 / 992 482 / 992 483 Fax : (855) 23 992 484 E-mail : [email protected]
Tuol Tumpung No. 170 A&B, Street No. 155 Phum 4, Sangkat Tuol Tumpung 1 Khan Chamkarmon Phnom Penh Kingdom of Cambodia Telephone : (855) 23 996 940 / 996 941 / 996 942 Fax : (855) 23 996 943 Email : [email protected]
10 2016 Annual Report BRANCHES IN PROVINCE
Battambang No. 102, Group 38, Street No. 3 (½) Phum 20 Ousaphea Sangkat Svay Pao Krong Battambang Battambang Province Kingdom of Cambodia Telephone : (855) 53 953 801 / 953 802 / 953 803 Fax : (855) 53 953 804 E-mail : [email protected]
Bavet National Road No. 1, Phum Bavet Kandal Sangkat Bavet 11 Krong Bavet Svay Rieng Province Kingdom of Cambodia Telephone : (855) 44 946 100 / 946 101 / 946 104 / 946 105 Fax : (855) 44 946 103 E-mail : [email protected]
Kampong Cham Kosamak Neary Roit Street Sangkat Kampong Cham Krong Kampong Cham Kampong Cham Province Kingdom of Cambodia Telephone : (855) 42 942 180 / 942 182 / 942 888 Fax : (855) 42 942 183 E-mail : [email protected]
Kampong Speu National Road No. 4 Krang Pol Tep Village Sangkat Rokar Thum Krong Chbar Mon, Kampong Speu Province Kingdom of Cambodia Telephone : (855) 25 987 500 / 987 501 / 987 502 / 987 503 Fax : (855) 25 987 504 E-mail : [email protected]
2016 Annual Report 11 Kampot No. 45, National Road No. 3 Phoum Kampong Bay Kang Tboung Khum Kampong Bay Srok Kampong Bay Kampot Province Kingdom of Cambodia Telephone : (855) 33 932 760 / 932 761 / 932 762 / 932 763 Fax : (855) 33 932 764 Email : [email protected]
Koh Kong Village 1, Sangkat Dorngtung Khan Smach Meanchey Krong Khemarakphoumin Koh Kong Province Kingdom of Cambodia Telephone : (855) 35 936 600 / 936 601 / 936 602 / 936 603 Fax : (855) 35 936 604 Email : [email protected]
Phsar Leu National Road No. 6, Chongkaosou Village Sangkat Sla Kram Krong Siem Reap Siem Reap Province Kingdom of Cambodia Telephone : (855) 63 962 100 / 962 101 / 962 102 Fax : (855) 63 962 103 E-mail : [email protected]
Preah Sihanouk Sopheak Mongkol Road, Sangkat No. 2 Krong Preah Sihanouk Preah Sihanouk Province Kingdom of Cambodia Telephone : (855) 34 934 130 / 934 131 / 934 132 Fax : (855) 34 934 133 E-mail : [email protected]
12 2016 Annual Report Poi Pet National Road No. 5, Phum Kbal Spean Sangkat Poi Pet Krong Poi Pet Banteay Meanchey Province Kingdom of Cambodia Telephone : (855) 54 967 356 / 967 357 / 967 358 Fax : (855) 54 967 359 E-mail : [email protected]
Siem Reap No. 39-41, Sivutha Street Phum Mondul 2 Sangkat Svay Dangkum Krong Siem Reap Siem Reap Province 13 Kingdom of Cambodia Telephone : (855) 63 964 777 / 964 889 Fax : (855) 63 963 899 E-mail : [email protected]
Suong No. 263, National Road No. 7 Cheung Lang Village Sangkat Suong Krong Suong Tboung Khmum Province Cambodia Telephone : (855) 42 218 380 / 218 381 / 218 382 / 218 383 Fax : (855) 42 218 384 E-mail : [email protected]
Takhmao Street No. 203 Corner Street No. 106 Khum Takhmao Krong Takhmao Kandal Province Kingdom of Cambodia Telephone : (855) 24 985 001 / 985 002 / 985 003 Fax : (855) 24 985 011 E-mail : [email protected]
2016 Annual Report 13 CORPORATE PROFILE
About Us
Cambodian Public Bank (“The Bank” or “Campu Bank”) was incorporated in Cambodia on 20 February 1992 and commenced its business on 25 May 1992. The parent company of the Bank is Public Bank Berhad, a bank licensed and incorporated in Malaysia. Public Bank is a top-tier bank and well-reputed for its prudent management, superior customer service, uncompromising service delivery standards, strong corporate governance and corporate culture.
The Bank is principally engaged in all aspects of banking business and provision of related financial services. Campu Bank continues to grow in strength year after year. The branch network has been expanded to 30 branches.
Corporate Philosophy
Campu Bank Cares
For its customers
►► By providing the most courteous and efficient service in every aspect of its business ►► By being innovative in the development of new banking products and services For its employees ►► By promoting the well-being of its staff through attractive remuneration and fringe benefits ►► By promoting good staff morale through proper staff training and development, and provision of opportunities for career advancement
For the community it serves ►► By assuming its role as a socially responsible corporate citizen in a tangible manner ►► By adhering closely to national policies and objectives thereby contributing towards the progress of the nation
… with Integrity.
14 2016 Annual Report FINANCIAL HIGHLIGHTS YEAR ENDED 31 DECEMBER 2016 2015 2014 OPERATING RESULTS (USD’000) Profit before tax expense 60,042 58,536 50,579 Profit after tax expense 47,625 46,668 40,161
KEY BALANCE SHEET DATA (USD’000)
Total assets 1,617,087 1,443,371 1,464,569 Loans and advances 986,775 941,201 835,466 Total liabilities 1,211,114 1,085,023 1,152,889 Deposits from customers 1,184,695 1,017,198 1,129,171 Paid-up capital 90,000 90,000 90,000 15 Shareholder’s equity 405,974 358,348 311,680 Commitments and contingencies 240,703 227,578 209,121
FINANCIAL RATIOS (%) Non-performing loans to total loans 0.84 0.74 1.29 and advances Net return on assets 2.95 3.23 2.74 Net return on equity 11.73 13.02 12.89 Interest margin to gross income 63.80 66.04 56.65 Non-interest expenses to gross income 20.75 22.95 22.92 Liquidity ratio 66.38 57.04 71.14 Solvency ratio 18.14 20.21 17.42 Gross Loan/Deposit ratio 84.49 93.56 75.49
PRODUCTIVITY RATIOS (USD’000) Gross loans per employee 1,264 1,299 1,184 Deposits from customers per employee 1,492 1,380 1,564 Profit before tax per employee 75.62 79.40 70.05
2016 Annual Report 15 SIMPLIFIED BALANCE SHEET
Assets
2016 2015
18.5% 61.0% 9.0% 65.2%
13.0% 7.8% 1.5% 1.3% 10.1%
10.2% 1.2% 1.2%
Cash and Bank Balances Other Assets
Deposits and Placements with Banks Statutory Deposits
Loans and Advances - net Property and Equipment
Liabilities & Shareholder’s Equity
2016 2015
15.8% 3.7% 73.3% 14.4% 4.2% 70.5%
5.6% 6.2% 1.5% 4.3%
0.2% 0.4%
Deposits from Customers Share Capital
Deposits by Banks Retained Earnings
Other Liabilities Non-Distributable Reserve
16 2016 Annual Report SUMMARY OF THREE-YEAR GROWTH
Total Assets Deposits From Customers USD’ 000 USD’ 000
1,600,000 1,200,000 1,400,000 1,000,000 1,200,000
1,000,000 800,000
800,000 600,000
600,000 1,464,569 1,443,371 1,617,087 1,017,198 1,184,695 1,129,171 400,000 400,000
200,000 200,000
0 0 `14 `15 `16 `14 `15 `16 17 Loans & Advances Shareholder’s Equity USD’ 000 USD’ 000 450,000
400,000 1,000,000 350,000
800,000 300,000
250,000 600,000 200,000
400,000 150,000 311,680 358,348 405,974 835,466 941,201 986,775 100,000 200,000 50,000
0 0 `14 `15 `16 `14 `15 `16
Profit Before Tax USD’ 000
70,000
60,000
50,000
40,000
30,000
20,000 50,579 58,536 60,042
10,000
0 `14 `15 `16
2016 Annual Report 17 BOARD OF DIRECTORS
Tan Sri Dato’ Sri Dr. Teh Hong Piow Dato’ Sri Lee Kong Lam Non-Executive Chairman Non-Executive Co-Chairman
Mr. Phan Ying Tong Dato’ Chang Kat Kiam Executive Director Director
18 2016 Annual Report 19
Mr. Quah Poh Keat Dr. Ghanty Sam Abdoullah Director Director
Dato’ Mohammed Najeeb bin Abdullah Director
2016 Annual Report 19 BOARD OF DIRECTOR’S PROFILE
Tan Sri Dato’ Sri Dr. Teh Hong Piow Non-Executive Chairman
Tan Sri Dato’ Sri Dr. Teh Hong Piow, aged 87, was appointed as the President/Managing Director of Cambodian Public Bank on 14 May 1992. He was re-designated as the Non-Executive Chairman of Cambodian Public Bank with effect from 28 December 2010.
Tan Sri Dato’ Sri Dr. Teh began his banking career in 1950 and has 67 years’ experience in the banking and finance industry. He founded Public Bank, the parent company in 1965 at the age of 35. He was appointed as a Director of Public Bank on 30 December 1965 and had been the Chief Executive Officer of the Public Bank since its commencement of business operations in August 1966. He was re-designated as Chairman of Public Bank and Chairman of Public Bank Group with effect from 1 July 2002. He is also the Chairman of several other companies in the Public Bank Group.
Tan Sri Dato’ Sri Dr. Teh had won both Malaysian and international acclaim for his outstanding achievements as a banker and the Chief Executive Officer of a leading financial services group. Awards and accolades that he had received include:
• Asia’s Commercial Banker of the Year 1991 • The ASEAN Businessman of the Year 1994 • Malaysia’s Business Achiever of the Year 1997 • Malaysia’s CEO of the Year 1998 • Best CEO in Malaysia 2004 • The Most PR Savvy CEO 2004 • The Asian Banker Leadership Achievement Award 2005 for Malaysia • Award for Outstanding Contribution to the Development of Financial Services in Asia 2006 • Lifetime Achievement Award 2006 • Award for Lifetime Achievement in Corporate Excellence, Dedication and Industry 2006 • Asia’s Banker of High Distinction Award 2006 • The BrandLaureate Brand Personality Award 2007
20 2016 Annual Report • ASEAN Most Astute Banker Award 2007 • Lifetime Entrepreneurship Achievement Award 2007 • The Pila Recognition Award 2007 • Asian Banker Par Excellence Award 2008 • Best CEO in Malaysia 2009 • Asia’s Banking Grandmaster 2010 • Asian Corporate Director Recognition Award 2010 for Malaysia • Value Creator: Malaysia’s Outstanding CEO 2010 • The BrandLaureate - Tun Dr. Mahathir Mohamad Man of the Year 2010 – 2011 • Best CEO (Investor Relations) 2011 for Malaysia • Asian Corporate Director Recognition Award 2011 for Malaysia • The BrandLaureate Premier Brand Icon Leadership Award 2011 • Best CEO (Investor Relations) 2012 for Malaysia 21 • Asian Corporate Director Recognition Award 2012 for Malaysia • Best CEO (Investor Relations) 2013 for Malaysia • Asian Corporate Director Recognition Award 2013 for Malaysia • BrandLaureate Banker of the Year Award 2012-2013 • Best CEO (Investor Relations) 2014 for Malaysia • Asian Corporate Director Recognition Award 2014 for Malaysia • Banker Extraordinaire 2015 • Global Chinese Entrepreneur Lifetime Achievement Award 2015 • BrandLaureate “Icon of Icons - The King of Banking” • Asia’s Best CEO (Investor Relations) 2015 for Malaysia • William “Bill” Seidman Lifetime Achievement in Financial Service Industry Award 2015 • Asian Corporate Director Recognition Award 2015 for Malaysia • Asia’s Best CEO (Investor Relations) 2016 for Malaysia • Asian Corporate Director Rcognition Award 2016 for Malaysia
Tan Sri Dato’ Sri Dr. Teh was awarded the Medal “For the Course of Vietnamese Banking” and the Medal “For the Development of Vietnam Banking Industry” by the State Bank of Vietnam in 2002 and 2017 respectively for his manifold contributions to the construction and development of Vietnam’s banking industry over the past years.
2016 Annual Report 21 Tan Sri Dato’ Sri Dr. Teh was conferred the Recognition Award 2007 by the National Bank of Cambodia in appreciation of his excellent achievement and significant contribution to the banking industry in Cambodia. He was confered the Royal Order of Monisaraphon, Commander by The Royal Government of The Kingdom of Cambodia in 2016, in recognition of his outstanding leadership and immense social economic contributions towards the progress and development of Cambodia over the last 24 years.
In recognition of his contributions to society and the economy, he was conferred the Doctor of Laws (Honorary) from University of Malaya, Malaysia in 1989. He is an Emeritus Fellow of the Malaysian Institute of Management and is a Fellow of the Asian Institute of Chartered Bankers; the Chartered Institute of Bankers, United Kingdom; the Institute of Administrative Management, United Kingdom; and the Governance Institute of Australia.
Dato’ Sri Lee Kong Lam Non-Executive Co-Chairman
Dato’ Sri Lee Kong Lam, aged 75, was appointed as a Director of Cambodian Public Bank on 10 March 2004 and re-designated as the Non-Executive Co-Chairman on 5 August 2015.
Dato’ Sri Lee has 49 years’ experience in the banking and finance industry. He joined Public Bank, the parent company in November 1996 as General Manager and was subsequently appointed Senior General Manager in 1997 and Executive Vice-President in 1998. He was appointed as an Executive Director of Public Bank on 28 November 2001 and was re-designated as Executive Director/Deputy Chief Executive Officer with effect from 1 October 2013. He was re-designated from Executive Director/ Deputy Chief Executive Officer to Non-Independent Non-Executive Director of Public Bank with effect from 28 November 2013, following his retirement as Executive Director/Deputy Chief Executive Officer of Public Bank with effect from 28 November 2013. He was appointed as Non-Independent Non-Executive Deputy Chairman of Public Bank with effect from 1 September 2015. He is also a Director of several other companies in the Public Bank Group.
Prior to joining Public Bank, he was with the Central Bank of Malaysia (“BNM”) and was involved primarily in the supervision and examination of banking institutions. He retired in August 1996 as the Head of BNM’s Examination Department and as a member of the BNM’s Management Committee.
He is a Fellow of CPA Australia and the Chartered Institute of Bankers, United Kingdom; and a Chartered Accountant of the Malaysian Institute of Accountants.
22 2016 Annual Report Mr. Phan Ying Tong Executive Director
Mr. Phan Ying Tong, aged 54, was appointed as the Executive Director of Cambodian Public Bank on 15 March 2010.
Mr. Phan has a total of 35 years’ service with Public Bank Group. He was a Branch Manager of several branches in Public Bank before his appointment as General Manager of Cambodian Public Bank in 2002. He was appointed Country Head of Cambodian Public Bank in 2007 and Regional Head of Indo-China Operations in 2014. He is a holder of a Master’s degree in Business Administration from the University of London.
Dato’ Chang Kat Kiam Director
Dato’ Chang Kat Kiam, aged 62, was appointed as a Director of Cambodian Public Bank on 10 March 2004. 23
Dato’ Chang has 42 years’ experience in the banking and finance industry. He has been with Public Bank, the parent company since 1975 and is experienced in all aspects of banking having managed branches and banking business portfolio in Head Office. He was appointed as the Chief Operating Officer of Public Bank in 2006 and re-designated as Senior Chief Operating Officer in October 2013. He was appointed to his present position as Deputy Chief Executive Officer of Public Bank in January 2016 and he is also a member on the Board of Directors of several subsidiary companies in the Public Bank Group. He is a holder of a Master’s degree in Business Administration.
Dr. Ghanty Sam Abdoullah Director
Dr. Ghanty Sam Abdoullah, aged 76, was appointed as a Director of Cambodian Public Bank on 27 June 2014.
Dr. Ghanty has 15 years’ experience in the banking and finance industry.
Dr. Ghanty holds a PhD. in Business Administration (International Business and Finance) from the University of Wisconsin-Madison (USA). He also holds a Master’s degree in Business Administration in Finance, Investment and Banking, and also a Master’s degree in Science in International Business and Finance from the University of Wisconsin-Madison (USA).
2016 Annual Report 23 He is a member of Kampuchea Certified Public Accountants and Auditors. He is presently a Member of Board of Directors of the Securities and Exchange Commission of Cambodia (SECC), and the Parliamentary Institute of Cambodia, and he is also an Advisor to the National Accounting Council, Regulator of the Cambodian Accounting Standard.
Mr. Quah Poh Keat Director
Mr. Quah Poh Keat, aged 64, was appointed as a Director of Cambodian Public Bank on 11 August 2009.
He was an Independent Non-Executive Director of Public Bank, the parent company from July 2008 until his appointment on 1 October 2013 as Deputy Chief Executive Officer II. Mr Quah was re-designated as Deputy Chief Executive Officer of Public Bank on 28 November 2013. He retired as Deputy Chief Executive Officer of Public Bank on 31 December 2015.
He is a Fellow of the Malaysian Institute of Taxation and the Association of Chartered Certified Accountants; and a Member of the Malaysian Institute of Accountants, the Malaysian Institute of Certified Public Accountants and the Chartered Institute of Management Accountants.
He was a partner of KPMG, Malaysia since October 1982 and appointed Senior Partner (also known as Managing Partner in other practices) in October 2000 until 30 September 2007. He retired from the firm on 31 December 2007.
He is experienced in auditing, tax and insolvency practices and had worked in Malaysia and United Kingdom; his experiences include restructuring, demergers and privatisation.
He is active in the banking and service sectors and was one of the tax advisers to the Association of Banks in Malaysia on taxation of interest-in-suspense. He was involved in providing tax and audit services to various domestic and foreign banks in Malaysia.
24 2016 Annual Report Dato’ Mohammed Najeeb bin Abdullah Director
Dato’ Mohammed Najeeb bin Abdullah, aged 63, was appointed as an Independent Non-Executive Director of Cambodian Public Bank on 9 June 2015.
Dato’ Mohammed Najeeb has a total of 38 years’ experience in the Malaysian banking industry. He had 9 years’ experience in branch banking with another major bank in Malaysia, before joining Public Bank in 1983 as a Senior Officer and was promoted to Branch Manager in 1985 and subsequently to Senior Manager in 1995 whereby he was responsible for branches business development.
He was the Head of Islamic Banking Division of Public Bank before he was transferred and appointed as the General Manager of Public Islamic Bank, the Islamic banking subsidiary of Public Bank, in November 2008. 25 Dato’ Mohammed Najeeb resigned from Public Islamic Bank when he was appointed as a Senator of the Parliament of Malaysia in April 2010.
Dato’ Mohammed Najeeb holds a Master’s Degree in Business Administration (Accounting and Finance) from Charles Darwin University, Australia. He also holds a Diploma in Marketing from Chartered Institute of Marketing, United Kingdom.
2016 Annual Report 25 CHAIRMAN’S STATEMENT
TAN SRI DATO’ SRI DR. TEH HONG PIOW CHAIRMAN
26 2016 Annual Report CHAIRMAN’S STATEMENT
Overall Business Environment
According to the semi-annual Asian Development Outlook Report issued by the Asian Development Bank in September 2016, Cambodia is projected to achieve a higher Gross Domestic Product (GDP) growth of 7.1% in 2017 as compared to 7.0% in 2016 driven mainly by solid garment and footwear exports, construction and real estate activities, rising government expenditure and moderate recovery in agriculture production although weaker growth in Euro, a sharper-than-expected global tightening of credit and surge in the US Dollar could constrain exports and competition from other low cost producing countries.
Total Foreign Direct Investments (FDIs) increased by 25% to reach USD2.15 billion in 2016 as compared to 2015. Cambodia is still highly dependent on FDIs with the bulk of the investments mainly in banking, manufacturing and infrastructure projects such as hydro-power dams and construction/upgrading of road and bridges by the Chinese investors.
The Cambodian government continued to build up its foreign reserves with 27 consistent increase of between 15% and 20% for the past decade to USD6.8 billion in 2016 or equivalent to 5 months of imports which is significantly higher than the 3.5-month guidelines recommended by the International Monetary Fund. Inflation rate in Cambodia is projected to increase marginally from 2.9% in 2016 to 3.0% in 2017.
The substantial increase in tax collection of USD1.49 billion in 2016 or increase of 14.9% as compared to 2015 will continue to finance the country’s total current expenditure as well as capital expenditure, and also increase in budget to support developmental policies especially as Cambodia had achieved lower-middle income country status with gross national income per capita of more than USD1,026 in July 2016.
The positive factors that can contribute towards the growth of Cambodia’s economy are the continuation of its highly open door policy on FDIs (for e.g. enabling companies to be 100% foreign-owned), prudent monetary and fiscal policies to sustain macroeconomic stability, ample development potentials leveraged by supportive government policies, promotion of domestic investments, implementation of the revised Financial Sector Development Strategy 2011-2020 and ongoing ASEAN integration. The ASEAN integration which is ongoing may be beneficial to Cambodia due in part to the free flow of trade and skilled labor among ASEAN countries.
With the on-going initiatives taken by the Cambodian government to diversify the country’s narrow-based economy and increase its national budget from USD4.36 billion in 2016 to USD5.04 billion or 15.6% in 2017 due to projected higher tax collection, the investment outlook in Cambodia is still promising and positive for the next few years though its economic growth remains modest.
2016 Annual Report 27 Summary of the Bank’s Financial Performance
Campu Bank’s pre-tax profit for 2016 increased to USD60.04 million, an increase of 2.56% as compared to USD58.54 million recorded in the previous financial year. The achievement was mainly due to improvement in the lending business, higher fee income, prudent management of funds and profit recovery from loans. Gross loans and advances increased by 4.81% or USD46.07 million to USD1,003.26 million as at 31 December 2016. For the year 2016, the Bank’s deposits from customers had increased by 16.47% or USD167.50 million to USD1,184.70 million.
Financing activities were well-spread across different industries and economic sectors with primary concentration on wholesale and retail (36.22%), services (20.66%), construction (11.09%), consumer items (7.06%), manufacturing (5.27%), Real Estate (4.76%) and Housing (3.31%).
The paid-up capital of the Bank remains at USD90.00 million in 2016 whilst the Bank’s return on equity decreased to 11.73% compared to 13.02% in 2015.
New Products and Services Introduced
Campu Bank’s commitment to provide efficient service and banking convenience to the customers had seen the Bank installing another two (2) Automated Teller Machines (“ATMs”) in 2016, bringing a total of 55 in its ATM network.
Campu Bank had on 3 February 2016, launched UnionPay International (UPI) Merchant Acquiring Acceptance Service to accept UPI cards via both POS terminals and ATMs.
In line with the initiative by the National Bank of Cambodia (NBC) to encourage the use of Khmer Riel in Cambodia, Campu Bank jointly with other pioneer banks had on 27 April 2016, introduced FAST Payment (Fast And Secured Transaction) which allows customers to perform instant funds transfer between the member banks.
Campu Bank had on 18 May 2016, issued a new design chip-based Campu VISA LifeStyle Debit Card with combined functionalities of an ATM card and Visa Debit card linked to either a savings account or a current account of customer’s choice. This card is more popular as it meets the customers’ needs and convenience to replace the existing ATM cards.
Campu Bank had on 18 July 2016 launched “Mobile Top-Up” service for Smart Axiata subscribers to perform their mobile recharge via Campu Bank’s Internet Banking service. The Bank had on 1 August 2016 launched “CPB engage” Mobile App operating with iOS and Android operating system.
28 2016 Annual Report New Products and Services Introduced (continued)
Campu Bank had on 25 November 2016, launched Khmer Riel Loans targeted small and medium size businesses with attractive interest rate, margin and repayment terms secured by hard or soft titles.
Compliance with National Bank of Cambodia’s (NBC) Regulations
Campu Bank remains steadfast and committed in ensuring compliance to the NBC’s regulations. The Bank will continue to ensure compliance with NBC’s guidelines and regulations and also uphold good corporate governance and professionalism in the management and operation of the Bank’s business.
Sustaining Growth Momentum
Campu Bank remains focused in attracting lower cost savings and current account funds by delivering superior service delivery at the frontline. The Bank capitalises on its low cost of funds to offer competitive pricing to potential and viable 29 businesses and ensure full participation and contribution towards the economic growth and development in the country.
The Bank’s lending business growth will continue to be supported by prudent yet fast paced expansion in the wholesale, retail and services sectors. The Bank’s lending directions are constantly being reviewed and modified to adapt to changes in the economic and market environments to remain competitive.
Campu Bank continues to invest substantially in updating and upgrading the competency, skills, knowledge and professionalism of its staff force. Continuous investments are being made on information technology (“IT”) to upgrade the Bank’s computer system with emphasis on delivering efficient customer service and new service delivery channels to cater to the banking needs of the Bank’s fast-growing customer base.
2016 Annual Report 29 Focus and Commitment
Campu Bank’s strong commitment to excellence in all aspects of its business and operations has been attested by the “Bank of the Year” award accorded to the Bank for five consecutive years from 2001 to 2005, 2008, 2009, 2012 and again in 2015 by The Banker, London and “Cambodian Domestic Retail Bank of the Year” for five consecutive years from 2012 to 2016 by Asian Banking & Finance.
Campu Bank was also awarded “USD Straight-Through-Processing Excellence Award” for five consecutive years from 2011 to 2015 by Deutsche Bank for its exceptionally high accuracy in the processing of payment messages.
Campu Bank expects 2017 to be even more challenging than 2016 in view of more new entrants in the market and tougher economic conditions. The key challenge to maintain strong profit growth and business expansion in an increasingly competitive business environment has motivated the Bank to continue delivering banking excellence.
The Board of Directors (“Board”) of Campu Bank is committed to growing the Bank’s market share and improving customer service delivery while at the same time ensuring good corporate governance, sound risk management policies and prudent credit policies and practices in order to support sustainable long-term growth and profitability of the Bank.
Acknowledgement
The Board and Management would like to thank the National Bank of Cambodia (“NBC”) and all other relevant authorities for their on-going invaluable advice, guidance and support.
30 2016 Annual Report POLICY AND PRACTICE GUIDELINES FOR CORPORATE GOVERNANCE
Duties and Responsibilities of the Board
The Board maps out and reviews the Bank’s strategic plans on an annual basis, so as to align the Bank’s business directions and goals with the prevailing economic and market conditions. The Board approves the Bank’s annual budget and carries out periodic review of the progress made by the various business units against the budget. The Board also reviews the action plans that are implemented by the Management to achieve business targets.
The Board prescribes minimum standards and establishes policies on the management of credit risks and other key areas of the Bank’s operations.
The Board’s other main duties include regular oversight of the Bank’s business 31 operations and performance, and ensuring that the infrastructure, internal controls, and risk management processes are well in place to assess and manage business risks inter-alia operational, credit, market and liquidity risks, and that they are implemented consistently. The Board carries out the various functions and responsibilities laid down according to the guidelines and directives that are issued by NBC from time to time.
Specialised Committees
The Board has set up the following committees as required by the Prakas on Governance in Banks and Financial Institutions:
• Audit Committee • Risk Committee • Remuneration and Nomination Committee
Audit Committee, Risk Committee and Remuneration and Nomination Committee comprised Dato’ Sri Lee Kong Lam, Dato’ Mohammed Najeeb bin Abdullah and Dr. Ghanty Sam Abdoullah.
2016 Annual Report 31 Board Meetings and Supply of Information
Board meetings are held at least 4 times a year. Reports on the progress of Campu Bank’s business operations prepared by the Bank’s management team are tabled for review by members of the Board. At these Board meetings, the members of the Board also evaluate business propositions and corporate proposals that require the Board’s approval owing to statutory requirements or because of significant financial impact on the Bank.
The agenda for every Board meeting, together with comprehensive management reports, proposal papers and supporting documents, are furnished to all the Directors for their perusal well in advance of the Board meeting date, so that the Directors have ample time to review matters to be deliberated at the Board meeting and to facilitate informed decision-making by the Directors.
Minutes of each Board meeting are circulated to all Directors for their perusal prior to confirmation of the minutes at the following Board meeting.
The Directors are regularly updated and advised by the Secretary of the Board on new statutory as well as regulatory requirements relating to the duties and responsibilities of Directors, including policy guidelines issued by NBC that concern Campu Bank. Every member of the Board has ready and unrestricted access to the advice and services of the Secretary, and the Directors have the liberty to seek external professional advice if so required by them.
Internal Control
Responsibility
The Board of Cambodian Public Bank Plc. (“the Bank”) is responsible for the adequacy and effectiveness of the Bank’s system of internal controls. The Board ensures that the system manages the Bank’s key areas of risk within an acceptable risk profile to increase the likelihood that the Bank’s policies and business objectives will be achieved. The Board continually reviews the system to ensure that this system of internal controls provides a reasonable but not absolute assurance against any material misstatement of management and financial information and records or against any financial losses or fraud.
32 2016 Annual Report The Board has established an on-going process for identifying, evaluating and managing the significant risks faced by the Bank and this process includes enhancing the system of internal controls as and when there are changes to the business environment or regulatory guidelines. The process is regularly reviewed by the Board.
Management assists the Board in the implementation of the Board’s policies and procedures on risk and control by identifying and assessing the risks faced, and in the design, operation and monitoring of suitable internal controls to mitigate and control these risks.
The Board is of the view that the system of internal controls in place for the year under review and up to the date of issuance of the financial statements, is adequate and effective to safeguard the shareholders’ investment, the interests of customers, regulators and employees, and the Bank’s assets. 33 Key Internal Control Processes
The key processes that have been established in reviewing the adequacy and effectiveness of the system of internal controls include the following:
(i) The Board Executive Committee was established by the Board to manage the business of the Bank and to ensure that the Bank’s operations are in accordance with the corporate objectives, strategies and the annual budget as well as the policies and business directions that have been approved by the Board. The Board Executive Committee implements strategies approved by the Board and addresses issues arising from changes in both the external business environment and internal operating conditions. Management committees are established to assume the functions as stated above. (ii) Internal Audit Department carries out periodic audits to assess the adequacy, effectiveness and adherence to the system of internal controls and highlights significant findings in respect of any inadequacies or non-adherence. Audits are carried out on all branches and Head Office departments, the frequency of which is determined by the level of risk assessed, to provide an independent and objective report on operational and management activities of these branches and Head Office departments. The annual audit plan is reviewed and approved by the Bank’s Audit Committee. The audit findings are submitted to the Bank’s Audit Committee for review at its periodic meetings.
2016 Annual Report 33 (iii) The Compliance and AML Department checks for compliance with applicable laws/regulations and internal policies and procedures, and highlights significant findings in respect of any non-compliance to the Bank’s Audit Committee for review at its periodic meetings. (iv) The Audit Committee of the Bank reviews internal control issues identified by the Internal Audit Department, Compliance and AML Department, the external auditors, regulatory authorities and management and evaluates the adequacy and effectiveness of the risk management and system of internal controls. The minutes of Audit Committee meetings are tabled to the Board of the Bank on a quarterly basis. (v) The Risk Committee (RC) was established by the Board to assist the Board to oversee the overall management of the principal areas of risk of the Bank. The Assets & Liabilities Management Committee (ALCO) manages market, liquidity and funding risks. (vi) Operational committees have also been established with appropriate empowerment to ensure effective management and supervision of the Bank’s core areas of business operations. These committees include the Bank’s Credit Committee and Public Bank Group’s Human Resource Committee, Business Continuity Management Committee and IT Steering Committee. (vii) The Bank’s annual business plan and annual budget are reviewed and approved by the Board. The Bank’s performance is assessed against the approved budgets and explanations are provided for significant variances on a quarterly basis to the Board. (viii) There are guidelines within the Bank for hiring and termination of staff, formal training programmes for staff and annual or semi-annual performance appraisals to enhance the level of staff competency in carrying out their duties and responsibilities. (ix) The Board receives and reviews reports from management on a regular basis. These reports include the accounts and financial information reports, the reports on monitoring of compliance with banking laws and National Bank of Cambodia’s guidelines on lending, capital adequacy and other regulatory requirements, periodic progress reports on business operations which are tabled to the Board at its quarterly meetings. (x) There are policy guidelines and authority limits imposed on management within the Bank in respect of the day-to-day banking and financing operations, extension of credits, investments, acquisitions and disposals of assets. (xi) Policies and procedures to ensure compliance with internal controls and the relevant laws and regulations are set out in operations manuals, guidelines and directives issued by the Bank which are updated from time to time.
34 2016 Annual Report Risk Management
Introduction
The Bank will continue to place emphasis on strengthening of the Bank’s risk management, infrastructure and capabilities within its integrated enterprise wide risk management framework, not only for regulatory compliance but with a view to improving operational and financial performance and optimizing capital efficiency.
Overall Risk Management Framework
Campu Bank had set up its Risk Committee which adheres to the Group’s risk management framework established by its parent bank, Public Bank, Malaysia.
The Board of Campu Bank is responsible for the management of risks of the Bank and maintains overall responsibility for risk oversight within Campu Bank to ensure clear accountability and responsibility for the risk management process. 35 Assets and Liabilities Management Committee
Campu Bank has set up an Assets and Liabilities Management Committee to develop the framework and set the objectives for the assets and liabilities management functions. The Committee also develops adequate processes, procedures and internal control measures for carrying out the assets and liabilities management functions.
Operational Risk Management Working Group
Campu Bank set up an Operational Risk Management Working Group (ORMWG) in 2015 to assist the Risk Committee (RC) with its operational risk management oversight. The ORMWG was set up to provide a platform for detailed/granular deliberations of operational risk exposures and issues specific to the business and support units of Campu Bank and to escalate significant operational risk issues and control strategies to the RC to facilitate its assessment of the bank-wide operational risk exposures including the assessment of the effectiveness of the controls put in place to manage the operational risk identified. The ORMWG would also look into the implementation of the Group operational risk management framework and other operational risk related policies as well as management of operational risk exposures and specific operational issues at the business/support level.
2016 Annual Report 35 Emerging Risk Working Group
Campu Bank set up an Emerging Risk Working Group (ERWG) in 2013 to enforce the discipline to continuously identify key emerging risks which may stem from the developments in local and global economic conditions as well as weaknesses in internal processes and/or practices brought about by changes in processes/ practices. The ERWG also ensures appropriate risk response and action plans are taken to mitigate the emerging risks. All identified emerging risks and the actions taken/to be taken are escalated to the senior management, the Credit Committees, risk committees and Board of Directors.
Code of Ethics
Campu Bank is in an industry where trust is of paramount importance given that a financial institution is a custodian of public funds. The trust and confidence that customers and the public have in the Bank are vital to the continued growth and success of the Bank. The Bank actively seeks to conduct itself with integrity and trustworthiness to engender such trust and confidence in the Bank.
A key determinant in building a trusted financial institution of high repute is the way its employees conduct themselves in their work and in the delivery of services to customers and the public. The Bank has taken, and continues to take, proactive initiatives to ensure that employees have values and principles, and conduct themselves to standards that are consistent with the expectations of customers and the public of a trusted financial institution.
The formalization of what constitutes acceptable conduct expected of employees of the Bank in the form of clear and documented codes and policies is a critical step in building trust and integrity in employee conduct and behavior. Such codes and policies include a Code of Ethics, an Anti-Fraud Policy and an Anti-Money Laundering and Counter Financing of Terrorism Policy.
Code of Ethics. The Bank issued staff circulars to guide employees’ conduct based on 6 key principles: (i) Avoid conflict of interest (ii) Avoid misuse of position (iii) Prevent misuse of information for personal gain or any purpose other than its intended purpose (iv) Ensure integrity and completeness of records (v) Ensure confidentiality of communication and transactions with customers
36 2016 Annual Report (vi) Fair and equitable treatment of customers
Anti-Fraud Policy. Fraud undermines the integrity and erodes the confidence and trust in a financial institution and the banking system in general. In addition to the extensive infrastructure established to prevent and detect fraud and fraudulent activities, the Bank also has an Anti-Fraud Policy to spell out the roles and responsibilities of each employee in combating fraud.
Anti-Money Laundering and Counter Financing of Terrorism Policy. The Bank has put in place an Anti-Money Laundering and Counter Financing of Terrorism Policy in the prevention of the use of the Bank for illicit and money laundering activities as well as financing of terrorist activities.
To ensure such code and policies are complied with, the Bank conducts comprehensive training on the standards of conduct expected of employees of the Bank and sends out regular reminders via staff circulars from time to time to nurture employees to embrace the Bank’s Code of Ethics. 37 Independency and Transparency
The Board of Campu Bank subscribes to the policy of sound corporate conduct, transparency and accountability in term of the extent and timeliness of corporate disclosures and financial reporting.
The Board is committed to providing a balanced, clear and comprehensible assessment of the financial performance and prospect of Campu Bank.
BUSINESS OPERATION TARGET
Financial Perspective
Campu Bank achieved a net profit before tax of USD60.04 million as at 31 December 2016 or 2.56% higher than previous year. Gross loans and advances increased by USD46.07 million or 4.81% as compared to end of year 2015 whilst deposits from customers increased by USD167.50 million or 16.47% from USD1,017.20 million as at 31 December 2015 to USD1,187.70 million as at 31 December 2016.
The Bank will continue its business strategy of focusing on meeting the banking and financing needs of the retail consumer and middle market commercial businesses, particularly the small and medium enterprises and on building a long-term core deposit funding base of retail depositors to further expand its balance sheet and maintain its rising profitability track record.
2016 Annual Report 37 Customer Perspective
A Committed Drive to Customer Service Excellence
The importance of excellent customer service in an intensely competitive banking and financing industry is key to the Bank in staying ahead of the competition. The Bank continues to commit significant resources in its pursuit of international standards of customer service. Customer service delivery excellence is a culture that permeates every level of staff in the Bank. Campu Bank’s tagline of “Excellence Is Our Commitment” is a way of life in the Bank.
Customer Satisfaction Our Top Priority
The Bank follows the customer service excellence culture of the parent bank, Public Bank. The main theme “Doing It Right For You” and “Your Needs, Our Focus” are aimed at cultivating, as well as reinforcing, the desired attitude in customer service delivery by front-line staff as well as seeking customer’s perception of the Bank’s service quality levels.
A Wider Spectrum of Customer Service Delivery Channels
With an increasingly sophisticated customer base seeking the convenience of carrying out banking transactions and accessing products and services information interactively, the multiple service delivery channels of the Bank offer the convenience sought by such customers.
Internal Process Perspective
The Bank’s IT initiatives in 2016 continued to emphasize on delivering enhanced banking products and service excellence. Various emerging technologies were deployed and new applications introduced to strengthen the existing IT foundation of the Bank.
To enhance a wide range of the Bank’s products and services, and to offer convenience to customers in conducting banking transactions outside banking hours, the Bank introduced ATM services and Credit Card services followed by launching of various types of Credit Cards such as VISA Credit Card, Debit Card and MasterCard and thereafter, the Bank had participated in the EasyCash network. Western Union Services, Internet Banking and 24/7 Cash Deposit Terminal are three added services for customers performing banking activities outside the banking hours.
38 2016 Annual Report In 2016, the Bank had strengthened enforcement on system security by carrying out security hardening of the Bank’s Automated Teller Machines and Cash Deposit Terminals as a pre-emptive and effective measure to prevent malware attack by perpetrators which may result in financial losses via unauthorized cash withdrawals from the ATMs.
In 2016, the Bank set up a Trade Finance in Head Office to centralize processing of trade bills transactions to improve service delivery to customers.
In 2016, the Bank opened a new branch each in Boeng Tumpun, Phnom Penh City and Chbar Mon, Kampong Speu Province bringing the branch network to 30 and has further targeted to open a few more branches in 2017.
Human Resource Development
The key to the success and strong performance of Campu Bank is the contribution of the team of dedicated, committed and knowledgeable employees who are continuously striving for excellence. 39 The Bank highly treasures this and further reinforces their strengths by providing extensive, wholesome and effective training to develop the skills of its employees. Campu Bank also continuously nurtures its human capital by a performance reward system; thus generating a strong performance culture that achieves results for both today’s and tomorrow’s business needs.
Developing Human Capital for Continued Excellence
The know-how, skills and expertise of its staff continue to be a cornerstone in the Bank’s intellectual capital. By continuously supporting life-long learning and development, the Bank demonstrates its recognition of training as a key driver to help the Bank outperform the competition and achieve superior results. Providing continuous access to learning and development of both operational and management skills sets is a commitment the Bank has made to further enhance the performance levels of all staff. This also directly encourages the upward mobility of staff within the organization, breeding a force of loyal, skillful and knowledgeable employees.
For the year 2016, all staff underwent regular in-house and on-the-job training. Newly recruited staff in particular are inducted through programmes encompassing our corporate values, banking system and operational processes and procedures and Anti-Money Laundering/Counter Financing for Terrorism (AML/CFT) to ensure that they are well equipped to meet customers’ needs. Opportunities for further enhancement of staff’s skills and knowledge are also made accessible through the many lessons and courses posted on the Bank’s 24-hour e-learning platform.
2016 Annual Report 39 Training and development was also expanded beyond borders. While staff were sent for specialised training at Public Bank’s Knowledge and Learning Centre in Malaysia, trainers from Public Bank, Malaysia and external trainers also came to Cambodia to train the masses to complement and supplement the local training contents.
With the expansion of two new branches in 2016, it is the Bank’s belief that a well rounded human capital will be one of the key drivers that will propel the Bank to greater heights and new levels of success.
Expanding Our Passion for Service
In line with the theme “Your Needs, Our Focus”, staff are encouraged to go beyond contractual obligations to serve with a passion. The Bank maintains a strong customer focus in its service delivery which directly impact profitability. The Bank’s passion for service excellence is well demonstrated through the continuous pursuit of improvement in skills and knowledge.
The Bank’s human capital approaches are always aligned to optimize on business goals such as revenue growth, deposit growth, staff productivity, customer satisfaction, cost containment and decreased turnover to gain competitive advantage for the Bank.
The Bank will continually aim for superior human capital practices as it believes that through its staff, the Bank will scale new heights of excellence and achieve accelerated growth.
Banking Industry
The level of competition in the banking industry is expected to intensify further due to more new entrants and banks adopting aggressive and proactive marketing strategies to increase their market share. Nevertheless, despite the intensive competition in the Cambodian banking industry, the Bank has put in place business strategies to expand its core business activities, particularly in lending to wholesale and retail sectors and middle market commercial enterprises, particularly small and medium enterprises, without compromising on its prudent credit standards and practices.
40 2016 Annual Report ANALYSIS OF THE FINANCIAL STATEMENTS
Analysis of the Statement of Income
Net Interest Income
Net interest income of the Bank increased by 2.41% to USD64.71 million in 2016 compared to USD63.19 million in 2015. This was due to increase in interest from Loans & Advances.
Net Fee and Commission Income
Net fee and commission income of the Bank dropped by 3.39% to USD11.67 million in 2016 compared to USD12.08 million in 2015. The drop was primarily derived from lower income from loan processing fees and loans committment fees. 41 General and Administrative Expenses
The Bank’s overhead expenses amounted to USD18.60 million in 2016, which was 6.20% lower than USD19.83 million incurred in 2015. Personnel cost decreased by 17.19% to USD8.43 million.
The cost income ratio of the Bank decreased to 22.64% for 2016 from 24.41% in 2015.
Allowance for Losses on Loans and Advances
Allowance for losses on loans and advances increased by 51.39% to USD1.09 million mainly due to higher specific allowance.
Income Tax
Income tax for the year increased by USD0.55 million or 4.63% to USD12.42 million due to the higher profit achieved.
The Bank pays corporate income tax at the rate of 20% of the taxable profits.
2016 Annual Report 41 Analysis of the Balance Sheet
Total Assets
Campu Bank’s total assets stood at USD1,617.09 million as at 31 December 2016, an increase of 12.0% over its total assets as at 31 December 2015. The increase in total assets in 2016 was primarily due to increase in Loans and Advances and placement with other banks.
Balances with other Banks
The balances with other banks increased by 29.71% to USD537.91 million as at 31 December 2016. Loans and Advances
The Bank’s net loans and advances increased by 4.84% or USD45.57 million to USD986.78 million in 2016 due to fast turnaround time for loan approval and efficient documentation and disbursement processes.
Total Liabilities and Shareholder’s Funds
The Bank’s total liabilities increased by 11.62% or USD126.09 million to USD1,211.11 million in 2016 primarily due to higher deposits from customers.
The Bank’s shareholder’s funds stood at USD405.90 million.
Deposits from Customers
The Bank’s deposits from customers increased by 16.47% to USD1,184.70 million in 2016. The growth in the core deposits from customers was due to the confidence the public have on the Bank and the Bank’s high standards in customer service delivery.
Deposits by Banks Deposits by banks decreased by 54.24% to USD2.7 million in 2016.
42 2016 Annual Report REPORT OF THE BOARD OF DIRECTORS
The Board of Directors of Cambodian Public Bank Plc. (“the Bank”) presents its report together with the consolidated financial statements of the Bank and its subsidiaries (together referred to as “the Group”) and the separate financial statements of the Bank (collectively referred to as “the financial statements”) as at 31 December 2016 and for the year then ended. THE GROUP
The Bank
The Bank is a commercial bank operating under the Cambodian Law on Commercial Enterprises and the supervision of the National Bank of Cambodia (“NBC”), pursuant to the Law on Banking and Financial Institutions of Cambodia and in accordance with Banking License No. 08 issued by the NBC. The Bank’s 43 license was renewed on 28 November 2006 for an indefinite period following NBC Prakas No. B7-06-207 dated 13 September 2006.
The Bank is principally engaged in all aspects of banking business and the provision of related financial services in the Kingdom of Cambodia, through the Bank’s head office at Phnom Penh and its provincial branches.
The Bank’s registered office address is Campu Bank Building, No. 23, Kramuon Sar Avenue (Street No. 114), Sangkat Phsar Thmey 2, Khan Daun Penh, Phnom Penh, Kingdom of Cambodia.
The Subsidiaries
Country of Effective percentage Name of subsidiary Principal activity incorporation of ownership
Campu Lonpac General insurance Insurance Plc. insurance Cambodia 51%
Campu Securities Plc. Securities underwriting, dealing and brokerage Cambodia 100%
2016 Annual Report 43 REPORT OF THE BOARD OF DIRECTORS (continued)
RESULTS OF OPERATIONS AND DIVIDENDS The financial results of the Group and the Bank are as follows:
Group Bank 2016 2015 2016 2015 USD USD USD USD
Income before income tax 61,356,778 59,664,045 60,041,762 58,535,977 Income tax expense (12,538,207) (11,984,369) (12,416,532) (11,867,611) Net income for the year 48,818,571 47,679,676 47,625,230 46,668,366
Equivalent in KHR’000 197,080,572 193,102,688 192,263,054 189,006,881
Attributable to:
Equity holder of the Bank 48,229,580 47,088,191 47,625,230 46,668,366 Minority interests 588,991 591,485 - -
48,818,571 47,679,676 47,625,230 46,668,366 PAID-UP CAPITAL There were no movements in the paid-up capital of the Group and the Bank during the year. RESERVES AND PROVISIONS
There were no material movements to or from reserves and provisions during the financial year other than those disclosed in the financial statements.
BAD AND DOUBTFUL LOANS AND ADVANCES
Before the financial statements of the Group and the Bank were drawn up, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad loans or the making of provisions for bad and doubtful loans and advances, and satisfied themselves that all known bad loans and advances had been written off and that adequate provisions had been made for bad and doubtful loans and advances.
At the date of this report, the directors are not aware of any circumstances which would render the amount written off for bad loans and advances or the amount of the provision for bad and doubtful loans and advances in the financial statements of the Group and the Bank inadequate to any material extent.
44 2016 Annual Report REPORT OF THE BOARD OF DIRECTORS (continued)
CURRENT ASSETS
Before the financial statements of the Group and the Bank were drawn up, the directors took reasonable steps to ensure that any current assets which were unlikely to be realized in the ordinary course of business at their value as shown in the accounting records of the Group and the Bank, have been written down to an amount which they might be expected to realize.
At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Group and the Bank misleading in any material respect.
VALUATION METHODS 45
At the date of this report, the directors are not aware of any circumstances that have arisen which would render adherence to the existing method of valuation of assets and liabilities in the financial statements of the Group and the Bank misleading or inappropriate in any material respect.
CONTINGENT AND OTHER LIABILITIES
At the date of this report, there is:
• No charge on the assets of the Group and the Bank which has arisen since the end of the financial year which secures the liabilities of any other person; and
• No contingent liability in respect of the Group and the Bank that has arisen since the end of the financial year other than in the ordinary course of banking business.
No contingent liability or other liability of the Group and the Bank has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may have a material effect on the ability of the Group and the Bank to meet its obligations as and when they become due.
2016 Annual Report 45 REPORT OF THE BOARD OF DIRECTORS (continued)
EVENTS SINCE THE BALANCE SHEET DATE No significant events occurred after the balance sheet date requiring disclosure or adjustment other than those already disclosed in the accompanying notes to the financial statements.
THE BOARD OF DIRECTORS
The members of the Board of Directors during the year and at the date of this report are:
Tan Sri Dato’ Sri Dr. Teh Hong Piow Non-Executive Chairman Dato’ Sri Lee Kong Lam Non-Executive Co-Chairman Mr. Phan Ying Tong Executive Director Mr. Quah Poh Keat Non-Independent Non-Executive Director Dato’ Chang Kat Kiam Non-Independent Non-Executive Director Dr. Ghanty Sam Abdoullah Independent Non-Executive Director Dato’ Mohammed Najeeb Bin Abdullah Independent Non-Executive Director AUDITOR Ernst & Young (Cambodia) Ltd. is the auditor of the Group. DIRECTORS’ INTERESTS No members of the Board of Directors have an interest in the shares of the Group and of the Bank.
DIRECTORS’ BENEFITS
During and at the end of the financial year, no arrangement existed, to which the Group and the Bank was a party, whose object was to enable the directors of the Bank to acquire benefits by means of the acquisition of shares in or debentures of the Group and the Bank or any other corporate body.
No director of the Bank has received or become entitled to receive any benefit by reason of a contract made by the Group and the Bank or with a firm of which the director is a member, or with a company in which the director has a material financial interest other than those disclosed in the financial statements.
46 2016 Annual Report REPORT OF THE BOARD OF DIRECTORS (continued)
STATEMENT OF THE BOARD OF DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS
The Board of Directors is responsible for ensuring that the financial statements give a true and fair view of the respective financial position of the Group and the Bank as at 31 December 2016, and their financial performance and cash flows for the year then ended. The Board of Directors oversees preparation of these financial statements by management who is required to:
i) Adopt appropriate accounting policies which are supported by reasonable and prudent judgments and estimates and then apply them consistently;
ii) Comply with the disclosure requirements and guidelines issued by the NBC and Cambodian Accounting Standards or, if there have been any departures 47 in the interests of fair presentation, these have been appropriately disclosed, explained and quantified in the financial statements;
iii) Maintain adequate accounting records and an effective system of internal controls;
iv) Prepare the financial statements on a going concern basis unless itis inappropriate to assume that the Group and the Bank will continue operations in the foreseeable future; and
v) Effectively control and direct the Group and the Bank in all material decisions affecting the operations and performance and ascertain that these have been properly reflected in the financial statements.
Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Group and the Bank and to ensure that the accounting records comply with the registered accounting system. It is also responsible for safeguarding the assets of the Group and the Bank and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Board of Directors confirms that the Group and the Bank have complied with the above requirements in preparing the financial statements.
2016 Annual Report 47 REPORT OF THE BOARD OF DIRECTORS (continued)
APPROVAL OF THE FINANCIAL STATEMENTS
We hereby approve the accompanying financial statements which give a true and fair view of the respective financial position of the Group and the Bank as at 31 December 2016, and their respective financial performance and cash flows for the year then ended in accordance with Cambodian Accounting Standards and relevant regulations and guidelines issued by the NBC.
On behalf of the Board of Directors:
Dato’ Sri Lee Kong Lam Quah Poh Keat Non-Executive Co-Chairman Non-Independent Non-Executive Director
Phnom Penh, Kingdom of Cambodia
12 January 2017
48 2016 Annual Report INDEPENDENT AUDITORS’ REPORT
To: The Shareholder of Cambodian Public Bank Plc.
Opinion
We have audited the accompanying consolidated financial statements of Cambodian Public Bank Plc. (“the Bank”) and its subsidiaries (together referred to as “the Group”) and the separate financial statements of the Bank which comprise the respective consolidated and separate balance sheets as at 31 December 2016 and the respective consolidated and separate income statements, statements of changes in equity and statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as “the financial statements”).
In our opinion, the consolidated and separate financial statements give a true 49 and fair view of the respective financial position of the Group and the Bank as at 31 December 2016, and their respective consolidated and separate financial performance and cash flows for the year then ended in accordance with Cambodian Accounting Standards and relevant regulations and guidelines issued by the National Bank of Cambodia.
Basis for Opinion
We conducted our audit in accordance with Cambodian International Standards on Auditing (“CISA”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group and the Bank in accordance with the sub-decree on the Code of Ethics for Professional Accountants and Auditors promulgated by the Royal Government of Cambodia, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and the Board of Directors
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Cambodian Accounting Standards and relevant regulations and guidelines issued by the National Bank of Cambodia, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
2016 Annual Report 49 INDEPENDENT AUDITORS’ REPORT (continued)
To: The Shareholder of Cambodian Public Bank Plc. (continued)
In preparing the financial statements, management is responsible for assessing the Group and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Bank or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Group and the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with CISA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
50 2016 Annual Report INDEPENDENT AUDITORS’ REPORT (continued)
Auditor’s Responsibilities for the Audit of the Financial Statements (continued)
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 51
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Maria Cristina M. Calimbas Partner
Ernst & Young (Cambodia) Ltd. Certified Public Accountants Registered Auditors
Phnom Penh, Kingdom of Cambodia 12 January 2017
2016 Annual Report 51 CONSOLIDATED BALANCE SHEET As at 31 December 2016
Notes 2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note 2.1) ASSETS
Cash on hand 3 52,676,930 212,656,766 48,363,809 195,873,426 Balances with the National Bank of Cambodia 4 221,322,683 893,479,671 244,501,543 990,231,249 Balances with other banks 5 319,968,422 1,291,712,520 173,069,597 700,931,868 Available-for-sale investment 6 25,000 100,925 25,000 101,250 Loans and advances 7 986,774,775 3,983,609,767 941,200,789 3,811,863,195 Investment in an associate 9 3,920 15,825 3,920 15,876 Property and equipment 10 20,825,209 84,071,369 21,872,850 88,585,043 Software costs 11 327,718 1,322,998 124,584 504,565 Other assets 12 3,730,171 15,058,699 2,424,306 9,818,439
TOTAL ASSETS 1,605,654,828 6,482,028,540 1,431,586,398 5,797,924,911
LIABILITIES AND SHAREHOLDER’S EQUITY
Liabilities
Deposits from other banks 13 2,697,817 10,891,087 5,871,647 23,780,170 Deposits from customers 14 1,162,907,531 4,694,657,703 996,353,327 4,035,230,974 Income tax payable 15.1 11,161,692 45,059,751 10,842,621 43,912,615 Borrowings 16 - - 40,000,000 162,000,000 Other liabilities 17 14,374,814 58,031,124 12,824,400 51,938,820
Total liabilities 1,191,141,854 4,808,639,665 1,065,891,995 4,316,862,579
Equity
Paid-up capital 18 90,000,000 363,330,000 90,000,000 364,500,000 Non-distributable reserves 18 60,000,000 242,220,000 60,000,000 243,000,000 Retained earnings 257,999,565 1,041,544,244 209,769,985 849,568,439
Equity attributable to equity holder of the Bank 407,999,565 1,647,094,244 359,769,985 1,457,068,439
Minority interest 6,513,409 26,294,631 5,924,418 23,993,893
Total equity 414,512,974 1,673,388,875 365,694,403 1,481,062,332
TOTAL LIABILITIES AND EQUITY 1,605,654,828 6,482,028,540 1,431,586,398 5,797,924,911
The attached notes 1 to 32 form part of these financial statements.
52 2016 Annual Report CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2016
Notes 2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note 2.1)
Operating income
Interest income 19 83,969,858 338,986,317 77,678,463 314,597,775 Underwriting income - net 1,694,205 6,839,506 1,437,861 5,823,337 Interest expense 20 (18,518,954) (74,761,017) (13,860,151) (56,133,612)
Net interest income 67,145,109 271,064,806 65,256,173 264,287,500
Fees and commission income 21 14,100,656 56,924,348 14,136,742 57,253,805 Fees and commission expense 21 (2,445,465) (9,872,342) (2,134,722) (8,645,624)
Net fees and commission 53 income 11,655,191 47,052,006 12,002,020 48,608,181
Other operating income 22 3,202,259 12,927,520 3,689,654 14,943,099
Total operating income 82,002,559 331,044,332 80,947,847 327,838,780
General and administrative expenses 23 (19,555,183) (78,944,274) (20,561,563) (83,274,330) Provision for losses on loans and advances 7 (1,090,598) (4,402,744) (722,239) (2,925,068)
Income before income tax 61,356,778 247,697,314 59,664,045 241,639,382
Income tax expense 15 (12,538,207) (50,616,742) (11,984,369) (48,536,694) Net income for the year 48,818,571 197,080,572 47,679,676 193,102,688
Net income attributable to:
Equity holder of the Bank 48,229,580 194,702,815 47,088,191 190,707,174 Minority interest 588,991 2,377,757 591,485 2,395,514
Net income for the year 48,818,571 197,080,572 47,679,676 193,102,688
The attached notes 1 to 32 form part of these financial statements.
2016 Annual Report 53 USD Total 48,818,571 318,014,727 - 1,673,388,875 365,694,403 414,512,974 47,679,676 365,694,403 USD interests 588,991 5,332,933 5,924,418 6,513,409 26,294,631 5,924,418 591,485 - Total USD 48,229,580 407,999,565 312,681,794 359,769,985 - 1,647,094,244 47,088,191 359,769,985 1,457,068,439 23,993,893 1,481,062,332 USD earnings Retained Minority 48,229,580 47,088,191 209,769,985 257,999,565 849,568,439 ( 20,000,000) 182,681,794 1,041,544,244 209,769,985
USD reserves 60,000,000 60,000,000 242,220,000 20,000, 000 60,000,000 - - Non-distributable 40,000,000
- Equity attributable to equity holder of the Bank (Note 18) CHANGES IN EQUITY Paid-up Capital - - OF The attached notes 1 to 32 form part of these financial statements. 90,000,000 2016 90,000,000 2015 90,000,000
USD For the year ended 31 December 2016 STATEMENT CONSOLIDATED Net income for the year Balance as at 1 January 2016
Balance as at 31 December Equivalents in KHR’000 (Note 2.1) 363,330,000 Balance as at 1 January 2015 90,000,000 Net income for the year Appropriation Balance as at 31 December Equivalents in KHR’000 (Note 2.1) 364,500,000 243,000,000
54 2016 Annual Report CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2016
Notes 2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Net cash generated from (used in) operating activities 24 58,856,792 237,604,871 41,369,497 167,546,461
Cash flows from investing activities Acquisitions of:
Property and equipment (2,319,438) (9,363,571) (1,802,296) (7,299,299) Software (531,668) (2,146,344) (93,999) (380,696) Proceeds from disposal of property and equipment 10 21,000 84,777 5,301 21,469 55
Net cash used in investing activities (2,830,106) (11,425,138) (1,890,994) (7,658,526)
Cash flows from financing activities
Repayment of borrowings (40,000,000) (161,480,000) - - Drawdown of borrowings - - 40,000,000 162,000,000
Net cash (used in)/generated from financing activities (40,000,000) (161,480,000) 40,000,000 162,000,000
Net increase in cash and cash equivalents 16,026,686 64,699,733 79,478,503 321,887,935
Cash and cash equivalents at beginning of year 310,259,669 1,256,551,658 230,781,166 940,433,252
Foreign exchange difference - (4,033,375) - (5,769,529)
Cash and cash equivalents at end of year 3 326,286,355 1,317,218,016 310,259,669 1,256,551,658
The attached notes 1 to 32 form part of these financial statements.
2016 Annual Report 55 SEPARATE BALANCE SHEET As at 31 December 2016
Notes 2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
ASSETS Cash on hand 3 52,676,273 212,654,114 48,363,449 195,871,968 Balances with the National Bank of Cambodia 4 219,622,683 886,616,771 242,801,543 983,346,249 Balances with other banks 5 318,290,797 1,284,939,947 171,902,513 696,205,178 Available-for-sale investment 6 25,000 100,925 25,000 101,250 Loans and advances 7 986,774,775 3,983,609,767 941,200,789 3,811,863,195 Investment in subsidiaries 8 15,570,000 62,856,090 15,570,000 63,058,500 Investment in an associate 9 3,920 15,825 3,920 15,876 Property and equipment 10 20,543,229 82,933,015 21,633,137 87,614,205 Software costs 11 327,718 1,322,998 124,584 504,565 Other assets 12 3,252,808 13,131,586 1,745,973 7,071,191
TOTAL ASSETS 1,617,087,203 6,528,181,038 1,443,370,908 5,845,652,177
LIABILITIES AND SHAREHOLDER’S EQUITY
Liabilities Deposits from other banks 13 2,697,817 10,891,087 5,871,647 23,780,170 Deposits from customers 14 1,184,695,136 4,782,614,264 1,017,198,383 4,119,653,451 Income tax payable 15.1 11,146,161 44,997,052 10,824,548 43,839,419 Borrowings 16 - - 40,000,000 162,000,000 Other liabilities 17 12,574,504 50,763,273 11,127,975 45,068,299
Total liabilities 1,211,113,618 4,889,265,676 1,085,022,553 4,394,341,339
Equity Paid-up capital 18 90,000,000 363,330,000 90,000,000 364,500,000 Non-distributable reserves 60,000,000 242,220,000 60,000,000 243,000,000 Retained earnings 255,973,585 1,033,365,362 208,348,355 843,810,838
Total equity 405,973,585 1,638,915,362 358,348,355 1,451,310,838
TOTAL LIABILITIES AND EQUITY 1,617,087,203 6,528,181,038 1,443,370,908 5,845,652,177
The attached notes 1 to 32 form part of these financial statements.
56 2016 Annual Report SEPARATE INCOME STATEMENT For the year ended 31 December 2016
Notes 2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Operating income
Interest income 19 83,969,825 338,986,184 77,665,613 314,545,733 Interest expense 20 (19,256,763) (77,739,552) (14,472,738) (58,614,589)
Net interest income 64,713,062 261,246,632 63,192,875 255,931,144
Fees and commission income 21 14,113,621 56,976,688 14,214,290 57,567,875 Fees and commission expense 21 (2,445,465) (9,872,342) (2,134,722) (8,645,624)
Net fees and commission income 11,668,156 47,104,346 12,079,568 48,922,251 57
Other operating income 22 3,354,986 13,544,078 3,814,965 15,450,608
Total operating income 79,736,204 321,895,056 79,087,408 320,304,003
General and administrative expenses 23 (18,603,844) (75,103,718) (19,829,192) (80,308,229) Provision for losses on loans and advances 7 (1,090,598) (4,402,744) (722,239) (2,925,068)
Income before income tax 60,041,762 242,388,594 58,535,977 237,070,706
Income tax expense 15 (12,416,532) (50,125,540) (11,867,611) (48,063,825)
Net income for the year 47,625,230 192,263,054 46,668,366 189,006,881
The attached notes 1 to 32 form part of these financial statements.
2016 Annual Report 57 SEPARATE STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2016
Non- Paid-up distributable capital reserves Retained (Note 18) (Note 18) earnings Total USD USD USD USD
Balance as at 1 January 2016 90,000,000 60,000,000 208,348,355 358,348,355 Net income for the year - - 47,625,230 47,625,230
Balance as at 31 December 2016 90,000,000 60,000,000 255,973,585 4050,973,585
Equivalent in KHR’000 363,330,000 242,220,000 1,033,365,362 1,638,915,362 (Note 2.1)
Balance as at 1 January 2015 90,000,000 40,000,000 181,679,989 311,679,989 Net income for the year - - 46,668,366 46,668,366 Appropriations - 20,000,000 (20,000,000) -
Balance as at 31 December 2015 90,000,000 60,000,000 208,348,355 358,348,355
Equivalent in KHR’000 364,500,000 243,000,000 843,810,838 1,451,310,838 (Note 2.1)
The attached notes 1 to 32 form part of these financial statements.
58 2016 Annual Report SEPARATE STATEMENT OF CASH FLOWS For the year ended 31 December 2016
Notes 2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Net cash generated from operating activities 24 58,234,414 235,092,330 40,792,219 165,208,485
Cash flows from investing activities
Acquisitions of:
Property and equipment (2,207,898) (8,913,284) (1,780,451) (7,210,827) 59 Software (531,668) (2,146,344) (93,999) (380,696) Proceeds from disposal of property and equipment 10 21,000 84,777 5,301 21,469
Net cash used in investing activities (2,718,566) (10,974,851) (1,869,149) (7,570,054)
Cash flows from financing activities
Repayment of borrowings (40,000,000) (161,480,000) - - Drawdown of borrowings - - 40,000,000 162,000,000
Net cash (used in)/generated from financing activities (40,000,000) (161,480,000) 40,000,000 162,000,000
Net increase in cash and cash equivalents 15,515,848 62,637,479 78,923,070 319,638,431
Cash and cash equivalents at beginning of year 309,092,225 1,251,823,509 230,169,155 937,939,307 Foreign exchange difference - (4,018,198) - (5,754,229)
Cash and cash equivalents at end of year 3 324,608,073 1,310,442,790 309,092,225 1,251,823,509
The attached notes 1 to 32 form part of these financial statements.
2016 Annual Report 59 NOTES TO THE FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended
1. CORPORATE INFORMATION
Cambodian Public Bank Plc. (“the Bank”) and its subsidiaries (together referred to as “the Group”) were incorporated and registered in the Kingdom of Cambodia.
The details of the Bank’s two subsidiaries as at the balance sheet date are as follows:
Country of Effective Name of subsidiary Principal activity incorporation percentage of ownership Campu Lonpac Insurance General insurance Cambodia 51% Plc. (“Campu Lonpac”)
Campu Securities Plc. Securities (“CSP”) underwriting, dealing and brokerage Cambodia 100%
Establishment and operations
The Bank was incorporated in Cambodia on 20 February 1992 under Registration No. Co-2083/96M and commenced operations on 25 May 1992. The immediate and ultimate parent company of the Bank is Public Bank Berhad (“PBB”), a bank licensed and incorporated in Malaysia. On 28 November 2006, the National Bank of Cambodia (“NBC”) renewed the banking license of the Bank for an indefinite period.
The principal activity of the Bank is the provision of comprehensive banking and related financial services in Cambodia.
The financial statements were authorized for issue by the BOD on 12 January 2017.
The Bank’s registered office address is Campu Bank Building, No. 23, Kramuon Sar Avenue (Street No. 114), Sangkat Phsar Thmey 2, Khan Daun Penh, Phnom Penh, Kingdom of Cambodia.
The Bank has a total of 30 branches located in Phnom Penh and major provinces in Cambodia (2015: 28 branches).
60 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
1. CORPORATE INFORMATION (continued)
Paid-up capital
The paid-up capital of the Bank as at 31 December 2016 is USD90,000,000 (2015: USD90,000,000).
Board of Directors
The members of the Board of Directors during the year and at the date of this report are:
Tan Sri Dato’ Sri Dr. Teh Hong Piow Non-Executive Chairman 61 Dato’ Sri Lee Kong Lam Non-Executive Co-Chairman Mr. Phan Ying Tong Executive Director Mr. Quah Poh Keat Non-Independent Non-Executive Director Dato’ Chang Kat Kiam Non-Independent Non-Executive Director Dr. Ghanty Sam Abdoullah Independent Non-Executive Director Dato’ Mohammed Najeeb Bin Independent Non-Executive Director Abdullah
Employees
As at 31 December 2016, the Group has a total of 853 employees (2015: 797 employees).
2. ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation ofthe consolidated and separate financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2016 Annual Report 61 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.1 Basis of preparation
The consolidated and separate financial statements (referred to as “the financial statements”) have been prepared based on the historical cost convention. The Group maintains, records and prepares financial statements in United States dollar (“USD”) in accordance with NBC Prakas No. B7-07-164 dated 13 December 2007 on Language Use, Currency Unit and Exchange Rate for Accounting Records and Reports.
The financial statements of the Group and the Bank have been prepared in compliance with Cambodian Accounting Standards (“CAS”) and relevant regulations and guidelines issued by the NBC.
The translation of the USD amounts in the financial statements into Khmer Riel (“KHR”) is provided for the sole purpose of complying with Prakas No. B7-07-164 dated 13 December 2007 using the official rate of exchange regulated by the NBC as at the reporting date, which was USD1 to KHR4,037 as at 31 December 2016 (2015: USD1 to KHR4,050). Such translation should not be construed as a representation that the USD amounts represent, or have been or could be, converted into Riel at that or any other rate.
Standards not yet adopted
On 24 March 2016, the National Accounting Council of Cambodia (“NAC”) announced that the implementation of CIFRS is extended until the end of 2018. During the transition period, banks and financial institutions, including insurance companies shall prepare progress report regarding the implementation of CIFRS and report annually to the NAC and other regulators.
The adoption of CIFRS is expected to have a significant impact on the financial statements of the Group.
Fiscal year
The Group’s fiscal year starts on 1 January and ends on 31 December.
62 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.2 Significant accounting judgments and estimates
In applying the Group’s accounting policies, management has used its judgment and made estimates in determining the amounts recognized in the financial statements as follows:
2.2.1 Operating lease
The Bank has entered into lease on premises used for its operations. The Bank has determined, based on the evaluation of the terms and conditions of the lease agreements (i.e., the lease does not transfer ownership of the 63 asset to the lessee by the end of the lease term and lease term is not for the major part of the asset’s economic life), the lessor retains all the significant risks and rewards of ownership of these properties. 2.2.2 Functional currency
CAS 21 requires management to use its judgment to determine the entity’s functional currency such that it most faithfully represents the economic effects of the underlying transactions, events and conditions that are relevant to the entity. In making this judgment, the Group considers the following:
a) The currency that mainly influences prices for financial instruments and services (this will often be the currency in which prices for its financial instruments and services are denominated and settled); b) The currency in which funds from financing activities are generated; and c) The currency in which receipts from operating activities are usually retained. 2.2.3 Provision for losses on loans and advances to customers
When preparing the financial statements, the quality of loans and advances is reviewed and assessed to determine their classification and level of allowance for losses on loans and advances, as more fully disclosed in Note 2.3.8.
2016 Annual Report 63 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.2 Significant accounting judgments and estimates (continued)
2.2.4 Recognition of deferred tax assets
Deferred tax assets are recognized for all unused tax losses and temporary differences to the extent that it is probable that future taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable income together with future tax planning strategies.
2.2.5 Impairment of non-financial assets
An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The Group assesses impairment on assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The factors that the Bank considers important which could trigger an impairment review include the following:
• Significant underperformance relative to expected historical or projected future operating results; • Significant changes in the manner of use of the acquired assets or the strategy for overall business; and • Significant negative industry or economic trends.
2.2.6 Estimated useful lives of property and equipment, and software costs
The Group estimates the useful lives of its property and equipment, and software costs. This estimate is reviewed periodically to ensure that the period of depreciation and amortization are consistent with the expected pattern of economic benefits from the items of property and equipment and software costs.
64 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies
2.3.1 Changes in accounting policies
The accounting policies and methods of computation applied by the Bank are consistent with those adopted in prior periods.
2.3.2 Subsidiary
Subsidiary is an entity over which the Bank has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Bank has such power over another entity. 65
In the Bank’s financial statements, investment in subsidiary is stated at cost less impairment losses. On disposal of such investment, the difference between the net disposal proceeds and the carrying amount is included in the income statement.
2.3.3 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Bank.
The subsidiaries are consolidated from the date of acquisition, being the date on which the Bank obtains control and continues to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intra-group balances, transactions and unrealized gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances.
Acquisition of a subsidiary is accounted for using the purchase method. The purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition.
2016 Annual Report 65 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued) 2.3 Summary of significant accounting policies (continued)
2.3.3 Basis of consolidation (continued)
The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.
2.3.4 Business combination
Business combination is accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
2.3.5 Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
66 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.6 Minority interest
Minority interest represents the portion of profit or loss and the net assets of the subsidiary not owned, directly or indirectly, by the Bank. Minority interests are presented separately in the consolidated income statement, and within equity in the consolidated balance sheet, separately from equity attributable to equity holder of the Bank. Acquisitions of minority interests that do not result in a loss of control are accounted for as equity transaction, whereby the difference between the consideration and the fair value of the share of the net assets acquired is recognized as an equity transaction and attributed to the owners of the Bank. 67 2.3.7 Loans and Advances
Loans and advances are stated in the balance sheet at the amount of principal plus interest receivables less any amounts written off and allowance for losses on loans and advances. Short term loans are those with repayment date within one year from the date the loan was advanced. Long term loans are those with final repayment date of more than one year from the date the loan was advanced.
Loans and advances are written off when there is no realistic prospect of recovery. Recoveries of loans and advances previously written off is recognized in other income in the income statement.
Loans and advances classified as substandard, doubtful or loss are considered non-performing loans.
2.3.8 Allowance for losses on loans and advances
Allowance for losses on loans and advances is made with regard to specific risks and relates to those loans and advances that have been individually reviewed and specifically identified as normal, special mention, substandard, doubtful or loss. In addition, a general allowance is also maintained for loans classified as normal.
2016 Annual Report 67 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.8 Allowance for losses on loans and advances (continued)
The allowance is based on a percentage of total outstanding loans and advances.
The Bank follows the mandatory credit classification and provisioning as required by NBC Prakas No. B7-09-074 dated 25 February 2009. The Prakas requires commercial banks to classify their loan portfolio into five classes. The mandatory level of specific allowance is provided depending on the loan classification as follows:
Classification Number of days past due Allowance rate
General allowance: Normal Nil to less than 30 days 1% Specific allowance: Special mention 30 days or more but less than 90 days 3% Substandard 90 days or more but less than 180 days 20% Doubtful 180 days or more but less than 360 days 50% Loss 360 days or more 100%
An uncollectible loan or portion of a loan classified as bad is written off after taking into consideration the realisable value of the collateral, if any when in the judgment of the management, there is no prospect of recovery.
2.3.9 Other credit-related commitments
In the normal course of business, the Bank enters into other credit-related commitments including loan commitments, letters of credit and guarantees. The accounting policy and provision methodology are similar to originated loans as disclosed above. Allowance is raised against other credit-related commitments when losses are considered probable.
2.3.10 Available-for-sale investments
Available-for-sale (“AFS”) investments are those which are designated as such or do not qualify to be classified as designated at fair value through profit and loss, held-to-maturity or loans and advances.
68 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.11 Determination of fair value
The fair value for financial instruments traded in the active markets at the balance sheet date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
For all other financial instruments that are not listed in an active market, the fair value is determined by using appropriate valuation techniques.
2.3.12 Offsetting financial instruments 69
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.
2.3.13 Classification of financial instruments between liability and equity
A financial instrument is classified as liability, if it provides for a contractual obligation to:
• Deliver cash or another financial asset to another entity; or • Exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the Group; or • Satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares.
If the Group does not have an unconditional right to avoid delivering cash or another financial asset to settle its contractual obligation, the obligation meets the definition of a financial liability
2016 Annual Report 69 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.14 Recognition of income or expense
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Interest income from loans and advances to customers and balances with the NBC and other banks is recognized on a daily accrual basis, except for loans and advances to customers that have been classified as substandard, doubtful or loss. Interest accruing to these loans shall instead be credited to an interest in suspense account. Income will be recognized upon collection.
Interest expense on deposits of customers, settlement accounts of other banks and borrowings are recognized on a daily accrual basis.
The following recognition criteria are also applied by the Group.
2.3.14.1 Fee and commission income
The Group earns fee and commission income from a diverse range of services it provides to its customers. Loan arrangement fee and commission on services and facilities extended to customers are recognized on the occurrence of such transactions. Commitment and guarantee fees on services and facilities extended to customers are recognised as income over the period in which the services and facilities are extended. Service charge and processing fee are recognised when the service is provided.
2.3.14.2 Dividend income
Dividend income is recognized when the Group’s right to receive the payment is established.
70 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.14 Recognition of income or expense (continued)
2.3.14.3 Insurance activities
Premium income Premium income in respect of direct insurance business is recognized upon inception of the risk regardless of the period of the policy. Premium income in respect of inward reinsurance business is recognised upon receipt of returns and advices from ceding companies.
Unearned premiums reserve (“UPR”) Unearned premiums represent the portion of the net premiums of insurance policies underwritten that relate to the unexpired periods of 71 the policies at the end of the financial year.
At the reporting date, the following methods are used to determine the UPR:
• 25% method for marine cargo, aviation cargo and transit business; and • 1/24 method for all other types of business.
Deferred acquisition costs (“DAC”)
DAC are costs which are primarily related directly to the securing of premiums on issue and renewal of insurance policies. Such costs are recognized when incurred and not deferred
Claims
Claims expense includes claims paid in the period and a provision for the estimated cost of all claims notified but not yet settled and for those incurred but not yet reported at the reporting date, net of expected reinsurance recoveries.
A liability for outstanding claims is recognised in respect of both direct insurance and co-reinsurance. The amount of outstanding claims is the best estimate of the expenditure required together with related expenses less recoveries to settle the present obligation at the reporting date.
2016 Annual Report 71 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.14 Recognition of income or expense (continued)
2.3.14.3 Insurance activities (continued)
Claims (continued)
Provision is also made for the cost of claims, together with related expenses incurred but not reported at the reporting date, using a mathematical method of estimation determined by the management on a case by case basis.
Estimating the provision for outstanding claims involves projection of the future claims experience based on current claims experience. As with all projections, there are elements of uncertainty and thus the projected future claims experience may be different from its actual claims experience due to the level of uncertainty involved in projecting future claims experience based on past claims experience.
These uncertainties arise from changes in underlying risks, changes in spread of risks, timing and amounts of claims settlement as well as uncertainties in the projection model and underlying assumptions.
Reinsurance
Reinsurance outward premium is recognised in accordance with treaty reinsurance agreements, upon receipt of confirmation from facultative reinsurers and in a manner consistent with the treatment of the accounting for premium income. Premium ceded for non-proportional reinsurance is treated as an expense in accordance with the pattern of the reinsurance ceded.
2.3.14.4 Securities and brokerages
Commission and fee income
The Group recognises revenue from rendering of services in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed based on surveys of work performed. If the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission earned by the Group.
72 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.15 Cash and cash equivalents
For statement of cash flow purposes, cash and cash equivalents consist of cash, deposits with other banks, and highly-liquid short term investments with an original maturity of less than ninety days that are readily convertible to known amounts of cash.
2.3.16 Investments in subsidiaries
Investments in subsidiaries are accounted for in the Bank’s financial statements at cost, less any impairment allowance, to recognize non-temporary decline in the value of the investment. 73 2.3.17 Investment in an associate
The Group’s investment in an associate is accounted for using the equity method in the consolidated financial statements and is carried at cost, less impairment losses, if any, determined on an individual basis, in the Bank’s separate financial statements. An associate is an entity in which the Group has significant influence.
Under the equity method, the investment in associate is carried in the balance sheet at cost plus post acquisition changes in the Group’s share of net assets of the associate.
The income statement reflects the share of the results of operations of the associate. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.
The share of profit or losses of an associate is shown on the face of the income statement.
2016 Annual Report 73 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.17 Investment in an associate (continued)
The financial statements of the associate are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the share of net profit or losses of an associate in the income statement.
Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the remaining investment and proceeds from disposal is recognized in profit or loss.
2.3.18 Property and equipment and software costs
Property and equipment, including software costs, are stated at cost excluding day-to-day servicing, less accumulated depreciation/amortization and provision for impairment in value (if any). Changes in the expected useful life are accounted for by changing the depreciation period or method, as appropriate and treated as a change in accounting estimate.
An item of property and equipment is derecognized upon disposal or when no future benefits are expected from its use. Any gain or loss on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in other operating income in the income statement in the year the asset is derecognized.
74 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.18 Property and equipment and software costs (continued)
Depreciation and amortisation
Construction in progress is not depreciated. Depreciation of property and equipment, except for buildings, is charged to the income statement on a declining balance basis at the following rates:
Leasehold improvements 20% Furniture, fittings and equipment 25% Information technology (“IT”) equipment 50% Motor vehicles 25% 75 Buildings are depreciated on a straight-line basis at 5% per annum.
When the carrying amount of property and equipment becomes USD 50 and below, they are fully depreciated within the same year.
2.3.19 Corporate income tax
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amounts expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted at the balance sheet date.
Deferred income tax
Deferred income tax is provided using the balance sheet liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which these differences can be utilized, except where the deferred tax arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit.
2016 Annual Report 75 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.19 Corporate income tax (continued)
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be utilized.
Unrecognized deferred income tax assets are re-assessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilized.
2.3.20 Foreign currency transactions and translation
The Group maintains its accounting system and records all transactions in original currencies. Monetary assets and liabilities denominated in foreign currencies (“FC”) at year-end are re-translated to USD at the exchange rates ruling at the reporting date. For prevailing exchange rates of USD and applicable FCs against KHR as at 31 December, see Note 32.
Income and expenses arising in FC are converted into USD at month-end using the applicable middle exchange rates rather than the exchange rates ruling at the transaction date.
2.3.21 Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made on the amount of the obligation.
2.3.22 Fiduciary assets
Assets held in trust or in a fiduciary capacity are not reported in the financial statements since they are not the assets of the Group.
76 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.23 Statutory deposits
Statutory deposits are maintained with the NBC in compliance with the Cambodian Law on Banking and Financial Institutions and are determined by defined percentages of minimum share capital and customers’ deposits as required by the NBC.
2.3.24 Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the 77 fulfillment of the arrangement is dependent on the use of a specific assetor assets and the arrangement conveys a right to use the asset.
Bank as a lessee
A lease that transfers substantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease. An operating lease is a lease other than a finance lease. Operating lease payments are recognized as an expense in the profit or loss on a straight-line basis over the lease term.
2.3.25 Related parties
Parties are considered to be related if the Group has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions, or vice-versa, or where the Group and the party are subject to common control or significant influence. Related parties may be individuals or corporate entities and include close family members of any individual considered to be a related party.
Related parties, as defined in Article 49 and 50 of the Cambodian Lawon Banking and Financial Institutions, include the following:
2016 Annual Report 77 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
2. ACCOUNTING POLICIES (continued)
2.3 Summary of significant accounting policies (continued)
2.3.25 Related parties (continued)
(a) Any person holding directly or indirectly at least ten percent (10%) of the capital or voting rights; (b) Any company of which the Bank directly or indirectly holds at least 10% of the capital or voting rights; (c) Any individual who participates in the administration, direction, management or internal control; and (d) The external auditors.
2.3.26 Dividends on paid-up capital
Dividends on paid-up capital are recognized as a liability and deducted from equity when approved by the BOD. Dividends declared during the year but approved by the BOD after the balance sheet date are dealt with as an event after the balance sheet date.
2.3.27 Rounding of amounts
Amounts in the financial statements have been rounded off to the nearest dollar and nearest thousand KHR for USD and KHR amounts, respectively.
78 2016 Annual Report KHR’000 KHR’000 (Note 2.1) (Note 2.1) equivalent equivalent 195,871,968 2,428,590 1,251,823,509 663,805,176
2015 2015 USD USD 1,283,347 5,197,555 46,480,450 188,245,823 96,826,263 392,146,365 48,363,449 195,871,968 48,363,449 599,652 309,092,225 163,902,513 Bank 5,935,222 KHR’000 KHR’000 (Note 2.1) (Note 2.1) equivalent equivalent 203,735,077 212,654,114 2,983,815 1,310,442,790 877,202,947 212,654,114 212,654,114 220,585,729
2016 2016 USD USD 1,470,206 50,466,950 739,117 324,608,073 217,290,797 79 52,676,273 52,676,273 54,641,003 KHR’000 KHR’000 (Note 2.1) (Note 2.1) equivalent equivalent 188,247,281 195,873,426 2,428,590 1,256,551,658 668,531,867
2015 2015 USD USD 1,283,347 5,197,555 46,480,810 48,363,809 195,873,426 96,826,263 392,146,365 48,363,809 310,259,669 599,652 165,069,597 Group Group Bank KHR’000 KHR’000 5,935,222 (Note 2.1) (Note 2.1) 203,737,729 212,656,766 220,585,729 212,656,766 2,983,815 1,317,218,016 883,975,521 2016 2016 equivalent equivalent (CONTINUED) STATEMENTS USD USD 1,470,206 50,467,607 52,676,930 54,641,003 739,117 52,676,930 326,286,355 218,968,422
THE FINANCIAL TO banks (Note 5) For the purpose of statement cash flows, and equivalents Group Bank comprise:
Cash on hand in KHR Cash on hand in other currencies (Note 4) Balances with other Cash on hand in USD Cash on hand Balances with the NBC The Group and the Bank’s cash on hand comprise: The Group and the Bank’s
NOTES as at 31 December 2016 and for the year then ended 3. CASH ON HAND
2016 Annual Report 79 - KHR’000 (Note 2.1) equivalent 983,346,249 44 ,550,000
- 2015 USD 3,202,067 12,968,371 9,000,000 36,450,000 82,624,196 334,627,994 136,975,280 554,749,884 242,801,543 11,000,000 Bank KHR’000 (Note 2.1) equivalent 13,750,672 36,333,000 629,698,042 886,616,771 158,391,057 -
2016 USD 3,406,161 9,000,000 39,234,842 155,981,680 219,622,683 - - 12,000,000 48,444,000 KHR’000 (Note 2.1) equivalent 12,968,371 43,335,000 554,749,884 990,231,249 334,627,994 44 ,550,000
- 2015 USD CAMBODIA 3,202,067 82,624,196 10,700,000 11,000,000 136,975,280 244,501,543 Group BANK OF KHR’000 (Note 2.1) 13,750,672 48,444,000 43,195,900 629,698,042 158,391,057 893,479,671 - 2016 equivalent (CONTINUED) STATEMENTS USD 3,406,161 12,000,000 39,234,842 10,700,000 THE NATIONAL 155,981,680 221,322,683 -
WITH
THE FINANCIAL TO
Reserve deposits Term deposit Term Current account in KHR Negotiable certificate of deposit Current account in USD Under NBC Prakas No. B7-012-140 dated 13 September 2012, banks are required to maintain certain cash reserves with the NBC certain 2012, banks are required to maintain Under NBC Prakas No. B7-012-140 dated 13 September KHR, than other currency in KHR and in deposits 8.0% and 12.5% of customer at deposits, computed of compulsory form the in respectively. Capital guarantee deposits (2015: USD21.57 with the NBC amounting to USD27.56 million Included in current accounts are cheques under clearing million). The Group and the Bank’s balances with the NBC are as follows: The Group and the Bank’s Reserve deposits
NOTES as at 31 December 2016 and for the year then ended 4. BALANCES
80 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
4. BALANCES WITH THE NATIONAL BANK OF CAMBODIA (continued)
Capital guarantee deposits
Bank
Under NBC Prakas No. B7-01-136 dated 15 October 2001, banks are required to maintain a capital guarantee of 10.0% of registered capital with the NBC. This deposit is not available for use in the Bank’s day-to-day operations but is refundable when the Bank voluntarily ceases to operate the business in Cambodia.
Campu Lonpac Insurance Plc
Under the Cambodian Sub-Decree on Insurance dated 22 October 2001 and Circular No. 009 of the Ministry of Economy and Finance, dated 9 December 2002, an insurance company is required to maintain a statutory deposit of 10% of registered capital with the NBC. 81 Campu Securities Plc
Statutory deposit is maintained with the NBC in compliance with the Law on the Issuance and Trading of Non-Government Securities and is determined in Article 17 of the Prakas No. 009 SECC/09 dated 18 November 2009 on Licensing of Securities Firms and Securities Representatives issued by the Securities and Exchange Commission of Cambodia (“SECC”).
Negotiable certificate of deposit
The negotiable certificate of deposit has a term of three months and bears interest at 0.66% - 0.74% per annum.
Interest rates
Annual interest rates on balances with the NBC are summarized as follows:
2016 2015
Current accounts Nil Nil Reserve deposits 0.21% - 0.38% 0.09% - 0.11% Capital guarantee deposits 0.20% - 0.22% 0.08% - 0.11% Negotiable certificate of deposit 0.66% - 0.74% - Term deposit - 0.16%
2016 Annual Report 81 KHR’000 (Note 2.1) equivalent 477,900,000 696,205,178 2015 USD 53,857,150 218,121,458 118,000,000 171,902,513 45,363 83,720
- Bank (Note 2.1) equivalent 126,320,947 1,158,619,000 1,284,939,947 - 2016 USD KHR’000 31,290,797 318,290,797 287,000,000 KHR’000 equivalent (Note 2.1) 700,931,868 477,900,000
2015 USD 53,857,150 218,121,458 118,000,000 173,069,597 ,212,447 4,910,410 Group (Note 2.1) 126,320,947 6,772,573 1,158,619,000 1,291,712,520
2016 equivalent
(CONTINUED) STATEMENTS USD KHR’000 31,290,797 287,000,000 319,968,422
WITH OTHER BANKS
1,677,625 THE FINANCIAL TO
Local banks This represents investment in Credit Bureau of Cambodia. Fair value could not be reliably determined due to the unpredictable determined could not be reliably Fair value Bureau of Cambodia. in Credit This represents investment at original is carried This investment fair value. at a reliable of arriving methods of suitable of future cash flows and the lack nature cost. Placements Current and savings accounts with: Overseas banks The Group and the Bank’s balances with other banks are as follows: The Group and the Bank’s 0.25% per 0.02% to from ranging rates at interest banks earn overseas banks and local with savings accounts maintained and Current annum (2015: 0.02% to 0.25%). Placements comprising term deposits earning interest at rates ranging from 0.40% to 2.00% per annum (2015: 2.00%).
NOTES as at 31 December 2016 and for the year then ended 5. BALANCES 6. INVESTMENT AVAILABLE-FOR-SALE
82 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
7. LOANS AND ADVANCES
The Group and the Bank’s loans and advances are as follows:
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Overdraft 286,616,986 1,157,072,772 270,071,464 1,093,789,429 Fixed loans 671,974,854 2,712,762,486 648,785,778 2,627,582,401 Housing loans 33,138,738 133,781,085 27,608,812 111,815,689 Vehicle loans 393,643 1,589,137 555,146 2,248,341 Trust receipts 5,869,143 23,693,730 5,563,932 22,533,925 Credit card facilities 2,747,007 11,089,667 2,109,401 8,543,074 Loans and advances - gross 1,000,740,371 4,039,988,877 954,694,533 3,866,512,859 83
Interest receivable 5,965,013 24,080,757 5,592,546 22,649,811 Interest in suspense (3,443,416) (13,901,070) (3,093,499) (12,528,671) Interest receivable - net 2,521,597 10,179,687 2,499,047 10,121,140
Total gross loans and advances and net interest receivable 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999
Allowance for losses on loans and advances (16,487,193) (66,558,797) (15,992,791) (64,770,804) Loans and advances - net 986,774,775 3,983,609,767 941,200,789 3,811,863,195
2016 Annual Report 83 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
7. LOANS AND ADVANCES (continued)
Further analysis of loans and advances are as follows:
(a) Movements of allowance for losses on loans and advances:
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1) Specific allowance: Balance at beginning of year 6,533,989 26,462,655 11,080,009 45,151,036 Provision/(reversal) during the year 724,699 2,925,611 (336,663) (1,363,485) Amounts written off (596,196) (2,406,843) (4,209,357) (17,047,896) Foreign exchange difference - (84,942) - (277,000) Balance at end of year 6,662,492 26,896,481 6,533,989 26,462,655
General allowance: Balance at beginning of year 9,458,802 38,308,149 8,399,900 34,229,593 Provision during the year 365,899 1,477,133 1,058,902 4,288,553 Foreign exchange difference - (122,966) - (209,997) Balance at end of year 9,824,701 39,662,316 9,458,802 38,308,149
Total allowance at end of year 16,487,193 66,558,797 15,992,791 64,770,804
(b) Grading of the loan portfolio, including net interest receivable are as follows:
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Normal loans secured 982,498,736 3,966,347,397 945,896,822 3,830,882,129 Special mention loans secured 12,381,074 49,982,396 4,208,242 17,043,380 Substandard loans secured 1,117,951 4,513,168 304,114 1,231,662 Doubtful loans secured 2,393,464 9,662,413 872,380 3,533,139 Loss loans secured 4,870,743 19,663,190 5,912,022 23,943,689 Total 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999
Refer to Note 27.2 on Credit risk for analysis of loans quality .
84 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
7. LOANS AND ADVANCES (continued)
(c) Analysis of loan portfolio by industry sector:
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Wholesale and retail 363,360,679 1,466,887,061 337,207,766 1,365,691,452
Services 207,304,203 836,887,068 215,720,070 873,666,284
Construction 111,280,350 449,238,773 81,302,795 329,276,320 85 Consumer items 70,795,942 285,803,218 58,855,042 238,362,920
Manufacturing 52,915,368 213,619,341 66,411,165 268,965,218
Real estate 47,705,315 192,586,357 50,617,726 205,001,790 Housing 33,237,468 134,179,658 27,682,210 112,112,951
Transportation, storage
and communication 25,872,633 104,447,819 29,676,745 120,190,817
Agriculture 22,675,567 91,541,264 25,894,412 104,872,369
Import 10,152,865 40,987,116 14,787,357 59,888,796
Exports 413,049 1,667,478 493,848 2,000,084
Others 57,548,529 232,323,411 48,544,444 196,604,998 Total 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999
(d) Analysis of loan portfolio by maturity:
Refer to Note 28 on Liquidity risk for maturity profile.
2016 Annual Report 85 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
7. LOANS AND ADVANCES (continued)
(e) Analysis of loan portfolio by residency, relationship, exposure and interest rates range: 2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1) Residency: Residents 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999 Non-residents - - - - 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999 Relationship: Related parties 3,710,080 14,977,593 3,710,080 15,025,824 Non-related parties 999,551,888 4,035,190,971 953,483,500 3,861,608,175 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999 Exposure: Large - - - - Non-large 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999 1,003,261,968 4,050,168,564 957,193,580 3,876,633,999
Annual interest rates: Overdraft 5.50% - 14.40% 5.50% - 14.40% Fixed loans 3.00% - 15.00% 3.00% - 15.50% Trust receipts 7.00% - 9.00% 7.00% - 10.00% Housing loans 3.00% - 12.00% 3.00% - 12.00% Vehicle loans 6.50% - 18.00% 6.50% - 18.00%
8. INVESTMENT IN SUBSIDIARIES
This represents investment in the following unquoted shares:
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Campu Lonpac 3,570,000 14,412,090 3,570,000 14,458,500 CSP 12,000,000 48,444,000 12,000,000 48,600,000 15,570,000 62,856,090 15,570,000 63,058,500
86 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
8. INVESTMENT IN SUBSIDIARIES (continued)
Investment in Campu Lonpac Insurance Plc.
On 30 August 2007, Campu Lonpac Insurance Plc (“Campu Lonpac”) was incorporated as a 51%-owned subsidiary of the Bank. The principal activity of Campu Lonpac is to provide general insurance services in Cambodia.
Investment in Campu Securities Plc.
On 15 February 2010, the Bank incorporated Campu Securities Plc (“CPS”) as a wholly-owned subsidiary. The principal activity of CPS is to provide securities related services which include but not limited to securities underwriting, dealing and brokerage. 87 9. INVESTMENT IN AN ASSOCIATE
The investment represents 49% equity interest in CPB Properties Co., Ltd. (“CPBP”), a company incorporated in Cambodia whose principal activities are to invest and lease the freehold land and building for rental income.
During the year, the Bank made advances to CPBP for acquisition of certain properties (Note 12).
2016 Annual Report 87 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
10. PROPERTY AND EQUIPMENT
Property and equipment of the Group and the Bank are as follows:
Group Buildings and Furniture, leasehold fittings and IT Motor improvements equipment equipment vehicles Total USD USD USD USD USD
Cost 1 January 2016 30,542,768 5,170,190 4,270,394 1,636,240 41,619,592 Additions 845,481 601,192 626,085 246,680 2,319,438 Transfers - - (17,050) - (17,050) Diposals and write-offs (143,082) (121,542) (110,130) (135,500) (510,254) 31 December 2016 31,245,167 5,649,840 4,769,299 1,747,420 43,411,726
Less accumulated depreciation
1 January 2016 11,497,485 3,489,660 3,575,283 1,184,314 19,746,742 Depreciation 1,869,304 614,753 680,619 156,242 3,320,918 Transfers - - (8,525) - (8,525) Diposals and write-offs (116,158) (119,803) (110,007) (126,650) (472,618)
31 December 2016 13,250,631 3,984,610 4,137,370 1,213,906 22,586,517
Net book value 31 December 2016 17,994,536 1,665,230 631,929 533,514 20,825,209 KHR’000 equivalent 72,643,942 6,722,534 2,551,097 2,153,796 84,071,369 (Note 2.1)
88 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
10. PROPERTY AND EQUIPMENT (continued)
Group
Buildings and Furniture, leasehold fittings and IT Motor improvements equipment equipment vehicles Total USD USD USD USD USD
Cost 1 January 2015 30,039,074 4,680,683 3,820,040 1,462,080 40,001,877 Additions 503,694 559,891 554,041 184,670 1,802,296 Disposals and write-offs - (70,384) (103,687) (10,510) (184,581) 31 December 2015 30,542,768 5,170,190 4,270,394 1,636,240 41,619,592 89
Less accumulated depreciation
1 January 2015 9,678,124 2,997,224 3,011,253 1,042,725 16,729,326 Depreciation 1,819,361 553,806 662,424 150,965 3,186,556 Disposals and write-offs - (61,370) (98,394) (9,376) (169,140)
31 December 2015 11,497,485 3,489,660 3,575,283 1,184,314 19,746,742 Net book value 31 December 2015 19,045,283 1,680,530 695,111 451,926 21,872,850 KHR’000 equivalent 77,133,396 6,806,147 2,815,200 1,830,300 88,585,043 (Note 2.1)
2016 Annual Report 89 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
10. PROPERTY AND EQUIPMENT (continued)
Bank
Buildings and Furniture leasehold fittings and IT Motor improvements equipment equipment vehicles Total USD USD USD USD USD
Cost 1 January 2016 29,813,349 5,007,406 4,049,106 1,444,937 40,314,798 Additions 845,481 600,268 617,469 144,680 2,207,898 Transfers - - (17,050) - (17,050) Diposals and write-offs (143,082) (121,542) (110,130) (135,500) (510,254) 31 December 2016 30,515,748 5,486,132 4,539,395 1,454,117 41,995,392
Less accumulated depreciation 1 January 2016 10,932,079 3,349,980 3,391,875 1,007,727 18,681,661 Depreciation 1,836,501 608,418 662,663 144,063 3,251,645 Transfers - - (8,525) - (8,525) Diposals and write-offs (116,158) (119,803) (110,007) (126,650) (472,618) 31 December 2016 12,652,422 3,838,595 3,936,006 1,025,140 21,452,163
Net book value 31 December 2016 17,863,326 1,647,537 603,389 428,977 20,543,229 KHR’000 equivalent 72,114,247 6,651,107 2,435,881 1,731,780 82,933,015 (Note 2.1)
90 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
10. PROPERTY AND EQUIPMENT (continued)
Bank
Buildings and Furniture leasehold fittings and IT Motor improvements equipment equipment vehicles Total USD USD USD USD USD
Cost 1 January 2015 29,309,655 4,518,947 3,619,549 1,270,777 38,718,928 Additions 503,694 558,843 533,244 184,670 1,780,451 Diposals and write-offs - (70,384) (103,687) (10,510) (184,581) 91 31 December 2015 29,813,349 5,007,406 4,049,106 1,444,937 40,314,798
Less accumulated depreciation 1 January 2015 9,153,722 2,866,178 2,847,233 871,043 15,738,176 Depreciation 1,778,357 545,172 643,036 146,060 3,112,625 Diposals and write-offs - (61,370) (98,394) (9,376) (169,140) 31 December 2015 10,932,079 3,349,980 3,391,875 1,007,727 18,681,661
Net book value 31 December 2015 18,881,270 1,657,426 657,231 437,210 21,633,137 KHR’000 equivalent 76,469,143 6,712,575 2,661,786 1,770,701 87,614,205 (Note 2.1)
2016 Annual Report 91 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
11. SOFTWARE COSTS
Movements of the Group and the Bank’s software are as follows:
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note2.1)
Cost As at 1 January 1,760,903 7,131,656 1,666,904 6,792,633 Additions 531,668 2,146,344 93,999 380,696 Transfers 17,050 68,831 - - Write-offs (23,248) (93,852) - - Foreign exchange difference - (22,892) - (41,673) As at 31 December 2,286,373 9,230,087 1,760,903 7,131,656
Less accumulated amortization As at 1 January 1,636,319 6,627,091 1,514,693 6,172,373 Amortization 337,007 1,360,497 121,626 492,585 Transfers 8,525 34,415 - - Write-offs (23,196) (93,642) - - Foreign exchange difference - (21,272) - (37,867) As at 31 December 1,958,655 7,907,089 1,636,319 6,627,091
Net book value 327,718 1,322,998 124,584 504,565
92 2016 Annual Report
- 801,090 2,735,127 2,735,127 (Note 2.1) equivalent 7,071,191 3,534,974 - 2015 KHR’000 USD KHR’000 197,800 675,340 872,833 1,745,973 2,490,268 6,741,790 2,775,030 (Note 2.1) equivalent 1,124,498 13,131,586
Bank USD KHR’000 616,861 687,399 1,670,000 278,548 3,252,808 2016
- 93 845,267 KHR’000 2,897,678 equivalent (Note 2.1) 9,818,439 6,075,494 - 2015 USD 208,708 715,476 1,500,122 2,424,306 Group KHR’000 3,763,021 6,741,790 2,915,332 (Note 2.1) 1,638,556 15,058,699 equivalent USD 932,133 722,153 (CONTINUED) STATEMENTS 2016
1,670,000 405,885 3,730,171 THE FINANCIAL TO balances with other banks
and advances properties during the year. of certain acquisition party pertains to advances made by the Bank for CPBP’s Advances to related Others include premium receivables, other accounts stationeries and supplies, suspense interbranch accounts. Interest receivable from Advances to related party Others Deposits from other banks pertain to current and demand accounts which do not bear interest. OTHER ASSETS Prepayments 13. DEPOSITS FROM OTHER BANKS
NOTES as at 31 December 2016 and for the year then ended 12.
2016 Annual Report 93 KHR’000 (Note 2.1) equivalent 1,311,366,231 1,595,265,403 1,210,804,710 2,217,107 4,119,653,451 0.00%-0.50% 0.25%-0.75% 1.00%-4.00% USD 2015 393,892,692 323,794,131 298,964,126 547,434 1,017,198,383 KHR’000 (Note 2.1) equivalent 2,012,738,127 1,435,353,497 1,329,432,391 5,090,249 4,782,614,264 2016 2015 0.00%-0.50% 0.25%-0.75% 1.25%-5.00% USD 2016 Bank 329,311,962 329,311,962 498,572,734 355,549,541 1,260,899 1,184,695,136 KHR’000 equivalent (Note 2.1) 2,217,107 1,311,366,231 1,513,485,065 1,208,162,571 4,035,230,974 USD 2015 298,311,746 373,700,016 323,794,131 547,434 996,353,327 KHR’000 (Note 2.1) equivalent 5,090,249 1,927,440,592 1,435,353,497 1,326,773,365 4,694,657,703 (CONTINUED) STATEMENTS
Group 2016 USD
477,443,793 355,549,541 328,653,298 1,260,899 1,162,907,531 THE FINANCIAL Deposits from related parties Refer to Note 26 on Related party transactions and balances. Maturity analysis Current accounts Savings deposits deposits Term Refer to Note 28 on Liquidity risk. Interest rates TO Term deposits Term Savings deposits Current accounts (ii) (iii) (i) The Group and the Bank’s deposits from customers comprise: The Group and the Bank’s Others
NOTES as at 31 December 2016 and for the year then ended 14. DEPOSITS FROM CUSTOMERS
94 2016 Annual Report
KHR’000 (Note 2.1) equivalent (Note 2.1) 90,926,315 48,063,825 - 48,063,825 4,119,653,451 60,634,802 2,399,743,560 1,568,348,774
USD KHR’000 USD KHR’000 2015 2015 11,867,611 22,450,942 387,246,611 592,529,274 11,867,611 - 14,971,556 1,017,198,383
KHR’000 KHR’000 (Note 2.1) equivalent equivalent (Note 2.1) 81,363,842 50,125,540 50,125,540 - 2,904,696,116 2,904,696,116 187,121,562 4,782,614,264 1,609,432,744
USD USD 2016 2016 20,154,531 Bank Bank 719,518,483 398,670,484 - 12,416,532 46,351,638 1,184,695,136 95
KHR’000 (Note 2.1) equivalent (Note 2.1) equivalent equivalent 90,926,315 48,536,694 12,416,532 48,536,694 - 60,634,802 4,035,230,974 2,399,743,560 1,483,926,297
USD USD KHR’000 2015 2015 11,984,369 22,450,942 14,971,556 996,353,327 592,529,274 366,401,555 - 11,984,369
Group Group (continued) KHR’000 KHR’000 (Note 2.1) equivalent (Note 2.1) 81,363,842 - 50,616,742 2,904,696,116 2,904,696,116 187,121,562 4,694,657,703 1,521,476,183 (CONTINUED) STATEMENTS
equivalent
2016 2016
USD USD 20,154,531 12,538,207 50,616,742 719,518,483 376,882,879 - 12,538,207 46,351,638 1, 162,907,531 THE FINANCIAL TO
Major components of income tax expense are as follows: organisations Individuals
corporations Types of customers Types INCOME TAX Current
Non-residents Non-government
NOTES as at 31 December 2016 and for the year then ended 14. DEPOSITS FROM CUSTOMERS (iv) Domestic 15.
Deferred
2016 Annual Report 95
(Note 2.1) 649,684 48,063,825 47,414,141 237,070,706 KHR’000 USD KHR’000 2015 160,416 11,867,611 11,707,195 58,535,977 KHR’000 (Note 2.1) equivalent equivalent 48,477,719 1,647,821 50,125,540 242,388,594
Bank USD 408,180 12,416,532 12,008,352 60,041,762 2016
KHR’000 (Note 2.1) equivalent 48,327,876 208,818 48,536,694 241,639,382
USD 11,984,369 51,560 11,932,809 59,664,045 Group 2015 (Note 2.1) equivalent 49,539,463 1,077,279 50,616,742 247,697,314
USD KHR’000 12,271,356 266,851 12,538,207 61,356,778 2016 (CONTINUED) STATEMENTS
(continued) TAX THE FINANCIAL TO Effective income tax Accounting profit before income tax Current income tax at the higher of taxable income for with the Cambodian tax regulations, current income expense is calculated In accordance the year multiplied by tax rate of 20% at reporting date and 1% turnover. Details of estimated current income tax expense and payable are as follows: Income tax expense at applicable tax rate of 20% to regulations and laws tax of application the Because authorities. tax the by examination periodic to subject are returns tax Bank’s The many types of transactions is susceptible to varying interpretations, amounts reported in the financial statements could be changed at a tax by the finalized been have 2010 year fiscal the to up returns tax Bank’s The authorities. tax the by determination final upon date later authorities with no significant assessment.
Non-deductible expenses
NOTES as at 31 December 2016 and for the year then ended 15. INCOME 15.1
96 2016 Annual Report
KHR’000 KHR’000 (Note 2.1) equivalent 38,114,649 48,063,825 (42,105,222) 43,839,419 (233,833)
USD 2015 9,353,288 11,867,611 - 10,824,548 (10,396,351)
KHR’000 (Note 2.1) equivalent 43,839,419 50,125,540 44,997,052 (140,719) (48,827,188)
Bank USD 10,824,548 12,416,532 2016 (12,094,919) - 11,146,161
97 KHR’000 (Note 2.1) 38,181,731 48,536,694 (42,571,567) 43,912,615 (234,243)
USD 9,369,750 11,984,369 - 10,842,621 (10,511,498) 2015 Group KHR’000 (Note 2.1) equivalent equivalent 43,912,615 50,616,742 (140,954) (49,328,652) 45,059,751
USD 10,842,621 12,538,207 2016 (12,219,136) (CONTINUED) STATEMENTS - 11,161,692
(continued) TAX THE FINANCIAL TO Foreign exchange difference Balance at end of year Current income tax (continued) Banking-related activities year for the income taxable of the higher the at is calculated tax income current regulations, tax Cambodian the with In accordance multiplied by the tax rate of 20% at reporting date and 1% turnover. Insurance-related activities 20% of at and premiums 5% of insurance at is calculated tax income current regulations, tax Cambodian with In accordance any taxable income not attributable to insurance and reinsurance activities and interest income institutions. from local banks and financial Details of movements income tax payable are as follows: Balance at beginning of year Current income tax expense Payments during the year
NOTES as at 31 December 2016 and for the year then ended 15. INCOME 15.1
2016 Annual Report 97 KHR’000 1,703,835 (Note 2.1) equivalent 23,372,141 19,992,323 45,068,299
2015 USD 420,700 4,936,376 11,127,975 5,770,899
(Note 2.1) equivalent 1,355,778 KHR’000 17,543,026 50,763,273 31,864,469 2016 Bank
USD 335,838 7,893,106 4,345,560 12,574,504
KHR’000 (Note 2.1) equivalent 1,703,835 30,242,662 51,938,820 19,992,323 2015
USD 420,700 4,936,376 7,467,324 12,824,400 Group KHR’000 (Note 2.1) equivalent 1,355,778 31,864,469 24,810,877 58,031,124
USD 335,838 7,893,106 (CONTINUED) STATEMENTS
6,145,870 2016 14,374,814 (continued) TAX THE FINANCIAL TO Deferred income tax Group and the Bank. annual interest at 1.25% (2015: 1.25%) during the year. The borrowings were repaid fully in 2016. annual interest at 1.25% (2015: 1.25%) during the year. Banker’s cheques Banker’s Accrued interest payable Others comprise mainly of withholding taxes payable on interest, reinsurance liabilities, claims and other accrued expe nses. There are no significant temporary differences that will require deferred income tax recognition in the financial statements of the of statements financial the in recognition tax income deferred require will that differences temporary significant no are There Borrowings made by the Bank from its parent company, Public Bank Berhad, have a term of three months, are unsecured and bear Borrowings made by the Bank from its parent company,
17. OTHER LIABILITIES
Others
NOTES as at 31 December 2016 and for the year then ended 15. INCOME 15.2 16. BORROWINGS
98 2016 Annual Report 322,935 KHR’000 (Note 2.1) equivalent 11,396,724 302,826,074 314,545,733
2015 USD 79,737 2,814,006 74,771,870 77,665,613 Bank 766,731 (Note 2.1) KHR’000 9,711,771 328,507,682 338,986,184 2016
USD
189,926 2,405,690 81,374,209 83,969,825
99 322,935 KHR’000 (Note 2.1) 302,826,074 314,597,775 11,448,766 2015
USD 79,737 2,826,856 74,771,870 77,678,463 Group
766,731 KHR’000 (Note 2.1) 9,711,904 328,507,682 338,986,317
equivalent equivalent equivalent
2016 USD
189,926 (CONTINUED) STATEMENTS 81,374,209
2,405,723 83,969,858
CAPITAL THE FINANCIAL TO
As at balance sheet date, the authorized share capital comprises 90 million ordinary shares, fully issued and paid par value of USD1 per share. There were no movement in the paid-up capital during year. The shareholder of the Bank is Public Berhad, a bank incorporated in Malaysia. Loans and advances Balances with the NBC Balances with other INTEREST INCOME INTEREST interest income arise from: The Group and the Bank’s NOTES as at 31 December 2016 and for the year then ended 18. PAID-UP banks
19.
2016 Annual Report 99
2,368,553 7,824,556 KHR’000 (Note 2.1) equivalent 47,683,704 737,776 58,614,589 2015
USD 584,828 1,931,989 11,773,754 182,167 14,472,738 2,322,313 7,581,458 (Note 2.1) equivalent 963,587 77,739,552 66,872,194 2016 Bank
USD KHR’000 575,257 1,877,993 16,564,824 238,689 19,256,763
2,368,553 7,824,556 KHR’000 (Note 2.1) equivalent 45,202,727 737,776 56,133,612
2015 USD 584,828 1,931,989 11,161,167 182,167 13,860,151 Group 2,322,313 7,581,458 (Note 2.1) equivalent 963,587 74,761,017 63,893,659
2016 USD KHR’000 575,257 (CONTINUED) STATEMENTS
1,877,993 15,827,015 238,689 18,518,954 THE FINANCIAL TO Current accounts INTEREST EXPENSE INTEREST interest expense arise from: The Group and the Bank’s Term deposits Term Savings deposits
NOTES as at 31 December 2016 and for the year then ended 20. Borrowings
100 2016 Annual Report
6,402,860 6,462,536 KHR’000 KHR’000 (Note 2.1) equivalent 48,922,251 29,019,360 14,984,951 57,567,875 (8,645,624) 698,168
USD 1,580,953 1,595,688 7,165,274 3,699,988 172,387 12,079,568 (2,134,722) Bank
6,494,952 6,382,634 (Note 2.1) 30,119,250 30,119,250 13,115,793 864,059 47,104,346 (9,872,342)
USD KHR’000 1,608,856 1,581,034 7,460,800 3,248,896 11,668,156 56,976,688 14,214,290 14,113,621 214,035 (2,445,465)
101 6,402,839 6,462,536 (Note 2.1) 48,608,181 29,019,360 14,984,951 57,253,805 (8,645,624) 384,119 2015 2016 2015
USD KHR’000 1,580,948 1,595,688 7,165,274 3,699,988 14,136,742 (2,134,722) 94,844 12,002,020 Group
6,494,931 6,382,634 KHR’000 (Note 2.1) equivalent equivalent equivalent 30,119,250 30,119,250 13,115,793 (9,872,342) 811,740 47,052,006 2016
USD (CONTINUED) STATEMENTS
1,608,851 1,581,034 7,460,800 3,248,896 14,100,656 56,924,348 (2,445,465) 11,655,191 201,075 AND COMMISSION INCOME
THE FINANCIAL FEES TO Net fees and Fees and commission Service charges Loan commitment fees Fees and commission income finance Trade Loan processing fees
expense commission income
NOTES as at 31 December 2016 and for the year then ended 21. NET Others
2016 Annual Report 101
9,765,822 4,497,922 KHR’000 KHR’000 (Note 2.1) equivalent 1,186,864 15,450,608
2015 USD 2,411,314 1,110,598 293,053 3,814,965 8,665,429 3,257,689 (Note 2.1) 1,620,960 13,544,078 2016 USD KHR’000 806,958 401,526 2,146,502 3,354,986 9,765,822 4,497,922 (Note 2.1) 679,355 14,943,099 2015 USD KHR’000 2,411,314 1,110,598 167,742 3,689,654 Bank Group 8,665,429 3,257,689 (Note 2.1) 1,004,402 12,927,520
equivalent equivalent equivalent 2016 USD KHR’000 806,958 2,146,502 (CONTINUED) STATEMENTS 248,799 3,202,259 THE FINANCIAL TO The Group and the Bank’s other operating income comprise: The Group and the Bank’s Recovery of loans written off Foreign exchange gains – net Others NOTES as at 31 December 2016 and for the year then ended 22. INCOME OTHER OPERATING
102 2016 Annual Report
63,253 661,381 298,756 445,480 698,625 3,268,727 1,427,090 1,364,733 1,478,185 1,632,952 3,538,991 3,431,363 4,458,884 KHR’000 KHR’000 (Note 2.1) equivalent 3,228,604 80,308,229 13,098,717 41,212,488
USD 2015 15,618 73,767 163,304 807,093 109,995 172,500 352,368 336,971 364,984 403,198 873,825 847,250 1,100,959 3,234,251 797,186 19,829,192 10,175,923
57,943 Bank 236,023 343,432 449,520 684,393 KHR’000 3,004,275 1,274,182 1,383,900 1,761,274 1,740,827 3,625,650 3,225,753 5,467,051 (Note 2.1) equivalent 3,337,585 75,103,718 14,487,388 34,024,522
2016 USD 14,353 58,465 85,071 111,350 111,350 744,185 169,530 315,626 342,804 436,283 431,218 898,105 799,047 1,354,236 3,588,652 8,428,170 826,749 18,603,844
63,253 103 740,389 575,064 468,468 547,532 698,625 KHR’000 1,432,890 1,635,763 1,478,185 1,691,766 3,657,717 3,564,482 4,621,244 (Note 2.1) 13,398,137 45,583,293 3,117,522 83,274,330
2015 USD 15,618 115,671 880,119 182,812 141,991 135,193 172,500 353,800 403,892 364,984 417,720 903,140 1,141,048 3,308,182 11,255,134 769,759 20,561,563 Group 57,943 500,992 339,919 504,774 551,890 684,393 KHR’000 1,274,182 1,582,690 1,761,274 3,361,303 1,844,509 3,745,714 5,645,942 (Note 2.1) 38,438,954 14,767,043 3,882,752 78,944,274 equivalent equivalent
2016 USD 14,353 84,201 124,100 125,037 136,708 169,530 315,626 392,046 436,283 832,624 456,901 927,846 1,398,549 9,521,663 3,657,925 19,555,183 (CONTINUED) STATEMENTS 961,791 EXPENSES ADMINISTRATIVE AND
THE FINANCIAL TO Others Others pertain mainly to accommodation, public relations, non-capitalizable fixed assets, subscription fees and clearing house. Shareholder’s meeting Shareholder’s Travelling and transportation Travelling Professional fees Insurance Telecommunication Directors’ remuneration Directors’ Stationeries and printing Other taxes Bank security Repairs and maintenance License fees Utilities Rentals and other related cost Staff Depreciation and amortization The Group and the Bank’s other general and administrative expenses comprise: The Group and the Bank’s
NOTES as at 31 December 2016 and for the year then ended 23. GENERAL
2016 Annual Report 103
(15,609) KHR’000 KHR’000 (Note 2.1) equivalent 13,098,717 56,676 250,210,490 237,070,706
2015 USD (3,854) 3,234,251 13,994 61,780,368 58,535,977 (49,050) KHR’000 (Note 2.1) 14,487,388 116,419 256,943,351 242,388,594 2016
USD (12,150) 3,588,652 28,838 63,647,102 60,041,762
(15,609) KHR’000 (Note 2.1) equivalent equivalent 13,398,137 56,676 255,078,586 241,639,382 2015
USD (3,854) 3,308,182 13,994 62,982,367 59,664,045 KHR’000 (Note 2.1) 14,767,043 116,419 262,531,726 247,697,314 ACTIVITIES (49,050)
equivalent
2016 USD (12,150)
3,657,925 65,031,391 61,356,778 (CONTINUED) STATEMENTS 28,838 THE FINANCIAL CASH USED IN OPERATING TO Cash generated from operating activities before changes in operating assets and liabilities Income before income tax Depreciation and amortization Adjustments for: Gain from sale of property and equipment Property and equipment written off
NOTES as at 31 December 2016 and for the year then ended Bank 24. Group NET
104 2016 Annual Report 2,381 1,992,770 KHR’000 36,401,076 10,009,818 (Note 2.1) 789,750,000 207,313,707 (42,105,222) 661,292 165,208,485 (428,224,543) (453,489,577)
588 2015 USD 492,042 8,987,920 2,471,560 51,188,570 195,000,000 (10,396,351) 163,282 40,792,219 (111,972,735) (105,734,455)
KHR’000 equivalent equivalent (Note 2.1) (6,083,093) 676,184,392 283,919,518 - (76,728,837) (12,812,752) (48,827,188) 5,839,638 235,092,330 (375,441,000) (183,982,181)
- USD 2016 70,329,333 (1,506,835) (3,173,830) 167,496,753 (12,094,919) 1,446,529 (19,006,400) (45,573,986) (93,000,000) 58,234,414
2,381 105 2,432,466 KHR’000 36,401,076 10,009,818 (Note 2.1) 210,118,028 789,750,000 (428,224,543) (455,628,066) (42,571,567) 296,310 167,546,461 2015
588 USD 600,609 8,987,920 2,471,560 51,880,995 195,000,000 (112,500,757) (105,734,455) 73,163 41,369,497 (10,511,498)
- KHR’000 (Note 2.1) equivalent equivalent (5,271,777) 672,379,322 286,933,522 ACTIVITIES (continued) (76,728,837) (12,812,752) (49,328,652) 6,259,021 (375,441,000) (183,982,181) 237,604,870
- 2016 USD 71,075,928 (CONTINUED) STATEMENTS (1,305,865) (3,173,830) (12,219,136) 166,554,204 1,550,414 58,856,792 (19,006,400) (93,000,000) (45,573,986) THE FINANCIAL CASH USED IN OPERATING TO (Increase)/decrease in operating assets: Balances with the NBC Balances with other banks Loans and advances AFS investment Other assets (Decrease)/increase in operating liabilities: Deposits from other banks Deposits from customers Other liabilities Income tax paid Net cash generated from Bank NOTES as at 31 December 2016 and for the year then ended Group 24. NET
operating activities
2016 Annual Report 105 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
25. COMMITMENTS AND CONTINGENCIES
(a) Lease commitments
Details of the Group and the Bank’s future minimum lease payments under a non-cancellable operating lease arrangement are as follows:
2016 2015
USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note 2.1)
Not later than one year 897,187 3,621,944 777,543 3,149,049 From one year but not later than five years 2,380,654 9,610,700 819,045 3,317,132 Over five years 1,170,505 4,725,329 - - 4,448,346 17,957,973 1,596,588 6,466,181
These operating leases exclude office rental to CPB Properties Co., Ltd, an associate, amounting to USD2,486,926 (2015: USD2,486,926).
(b) Lending commitments
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note 2.1) Unused portion
of overdraft 133,556,637 539,168,144 137,032,667 554,982,301
Letters of credit 69,228,123 279,473,933 48,226,473 195,317,216
Bank guarantees 33,843,957 136,628,055 39,525,773 160,079,381
Others 4,074,331 16,448,074 2,793,340 11,313,027
240,703,048 971,718,206 227,578,253 921,691,925
106 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
25. COMMITMENTS AND CONTINGENCIES (continued)
(c) Capital commitments
2016 2015 USD KHR’000 USD KHR’000 equivalent equivalent (Note 2.1) (Note 2.1)
Capital commitments - - 96,600 391,230
Capital commitments pertain to committed investments or expected capital expenditures where contracts are already entered as at balance sheet date.
(d) Legal claims 107
During the year, the Bank pursued legal claims against borrowers in default. Majority of these claims are still being negotiated and/or disputed by borrowers, thus, neither the ultimate outcome of these claims, nor the amounts recoverable can be determined at this time.
2016 Annual Report 107
------KHR’000 (Note 2.1) equivalent 15,009,300 121,500,000 150,269,361 162,000,000 2015
- - - - - 30,000,000 37,103,546 - - 40,000,000 - - - KHR’000 USD 6,741,790 (Note 2.1) equivalent 14,961,122 3,706,000 Net outstanding balance 666,105,000 86,668,734 28,259,000 2016
- - - - 1,670,000 165,000,000 21,468,599 7,000,000 ------3,706,000 450,279 696,851 - KHR’000 USD 1,294,173 (Note 2.1) equivalent 2015 ------USD 111,180 319,549 172,062 ------
450,977 690,250 KHR’000 2,999,814 equivalent (Note 2.1) Net transaction amount 17,347
AND BALANCES ------2016 USD
111,711 743,080 170,981 4,297 (CONTINUED) STATEMENTS
expense TRANSACTIONS
transaction Nature of banks - placements Interest income Balances with other banks - current account Borrowings Interest income Balances with other Balances with other Rental Interest income Advances Loans THE FINANCIAL TO
(associate) CPB Properties Related party (shareholder) Public Bank Significant transactions with related parties during the year, which were made at normal terms and conditions, the resulting Significant transactions with related parties during the year, outstanding balances as at year end were follows: Berhad- Laos Public Bank branch (associate) banks - placements Berhad
NOTES as at 31 December 2016 and for the year then ended PARTY 26. RELATED
108 2016 Annual Report
------16,626 KHR’000 KHR’000 (Note 2.1) equivalent 45,834,644 38,587,833 2015
------4,080 9,527,860 11,317,196 ------16,471 KHR’000 USD (Note 2.1) equivalent 50,090,418 38,473,643 Net outstanding balance 2016
------4,080 9,530,256 12,407,832 - - - 109 231,822 981,842 275,688 618,775 KHR’000 USD 1,499,136 3,480,975 1,663,866 (Note 2.1) equivalent 2015 - - - USD 57,240 68,071 370,157 859,500 242,430 410,831 152,784 - - - 256,753 383,148 772,726 KHR’000 1,849,935 2,499,500 1,128,600 2,272,528 equivalent (Note 2.1) Net transaction amount AND BALANCES (continued)
- - - 2016 USD
63,600 94,909 191,411 191,411 458,245 619,148 279,564 562,925 (CONTINUED) STATEMENTS
TRANSACTIONS
transaction Nature of Fee and commission income Interest expense Insurance expense deposits Customers’ Rental income Interest expense deposits Customers’ Loans and advances Remuneration and benefits Rental income THE FINANCIAL TO
(subsidiary) CSP (subsidiary) Key management personnel Campu Lonpac
Related party
NOTES as at 31 December 2016 and for the year then ended 26. PARTY RELATED
2016 Annual Report 109
(Note 2.1) 195,871,968 392,146,365 696,205,178 3,811,863,195 801,090 5,096,989,046
2015 KHR’000 USD KHR’000 25,000 101,250 48,363,449 96,826,263 941,200,789 197,800 1,258,515,814 100,925 KHR’000 (Note 2.1) equivalent equivalent 212,654,114 220,585,729 5,711,122,540 1,284,939,947 171,902,513 3,983,609,767 9,232,058
2016 USD 25,000 52,676,273 54,641,003 318,290,797 986,774,775 2,286,861 1,414,694,709
101,250 KHR’000 (Note 2.1) equivalent 195,873,426 392,146,365 700,931,868 3,811,863,195 845,267 5,101,761,371
2015 USD 25,000 48,363,809 96,826,263 173,069,597 941,200,789 208,708 1,259,694,166 Bank Group (Note 2.1) 2016 212,656,766 220,585,729 10,504,811 1,291,712,520 3,983,609,767 5,719,170,518 equivalent USD KHR’000 (CONTINUED) STATEMENTS 25,000 100,925 52,676,930 54,641,003 319,968,422 986,774,775 2,602,133 1,416,688,263 RISK MANAGEMENT
THE FINANCIAL TO
The Group’s activities expose it to a variety of financial risks: credit risk, market risk (including currency risk, interest rate risk and price and risk rate interest risk, currency (including risk market risk, credit risks: financial of variety a to it expose activities Group’s The in being of consequence inevitable an are risks operational the and business, financial the to core is risk Taking risk. liquidity and risk), business. The Group does not use derivative financial instruments such as foreign exchange contract and interest rate swaps to manage its risk exposure. On the other hand, Bank has recognized regulations. is to comply with NBC’s of the Group in risk management primary objective A a Credit Committee The Board of Directors has established on risk management. best practices international of achieving the importance to formulate broad parameters of acceptable risk for the Bank and monitor activities against these parameters. The Group and the Bank hold following financial assets liabilities: Financial assets Cash on hand Balances with the NBC Balances with other banks Loans and advances AFS investment AFS Other assets financial assets Total NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL
110 2016 Annual Report
(Note 2.1) 23,780,170 162,000,000 4,119,653,451 21,696,158 4,327,129,779
2015 KHR’000 USD KHR’000 5,871,647 40,000,000 5,357,076 1,068,427,106 - KHR’000 (Note 2.1) equivalent equivalent 10,891,087 4,782,614,264 1,017,198,383 33,220,247 4,826,725,598
- 2016 USD 2,697,817 1,184,695,136 8,228,944 1,195,621,897
111 KHR’000 (Note 2.1) equivalent 23,780,170 162,000,000 4,035,230,974 21,696,158 4,242,707,302
2015 USD 5,871,647 40,000,000 996,353,327 5,357,076 1,047,582,050 Bank Group -
(continued) (Note 2.1) 10,891,087 4,694,657,703 33,220,247 4,738,769,037 equivalent - 2016 USD KHR’000 (CONTINUED) STATEMENTS
2,697,817 1,162,907,531 8,228,944 1,173,834,292
RISK MANAGEMENT THE FINANCIAL TO Operational risk is the risk of direct or indirect loss arising from inadequate or failed internal processes, personnel, technology and technology personnel, processes, internal failed or inadequate from loss arising indirect or direct of risk the is risk Operational and regulatory risks such as those arising from legal and liquidity market factors other than credit, and from external infrastructure, requirements and generally accepted standards of corporate behaviour. and reporting processes, proper monitoring risk management operational through established risk loss is managed operational The by the provided business units and oversight of the independent and support units which are by control business activities of the senior management of the Group.
Financial liabilities Deposits from other banks Deposits from customers Borrowings Other liabilities financial Total liabilities NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.1 Operational risk
2016 Annual Report 111 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
27. FINANCIAL RISK MANAGEMENT (continued)
27.1 Operational risk (continued)
The Group’s operational risk management entails the establishment of clear organisational structures, roles and control policies. Various internal control policies and measures have been implemented including the establishment of signing authorities, defining system parameters controls, streamlining procedures and documentation and compliance with regulatory and other legal requirements. These are continually reviewed to address the operational risks of the business unit as well as to assess the level of compliance with the Group policies by a programme of periodic reviews undertaken by the internal audit function. The results of internal audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Group. 27.2 Credit risk
The Group takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss to the Group by failing to discharge an obligation. Credit risk is the most important risk for the Group’s business. Credit exposure arises principally in lending activities that lead to loans and advances. There is also credit risk in off-balance sheet financial instruments, such as loan commitments. The lending activities are guided by the Group’s credit policy to ensure that the overall objectives in the area of lending are achieved; i.e., that the loan portfolio is strong and credit risks are well diversified. The credit policy documents the lending policy, collateral policy and credit approval processes, including the Group’s own internal grading system, and procedures implemented to ensure compliance with the NBC’s guidelines.
(a) Credit risk measurement
The Group assesses the probability of default of individual counterparties using internal rating tool. Local credit committee is responsible for determining the risk rating policies.
Risk ratings are reviewed and updated regularly, and in events of (i) change of loan terms and conditions including extension; (ii) repayment irregularities or delinquencies and (iii) adverse information relating to the borrower or transaction. .
112 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
27. FINANCIAL RISK MANAGEMENT (continued)
27.2 Credit risk (continued)
(b) Risk limit control and mitigation policies
The Bank operates and provides loans and advances to individuals or enterprises within the Kingdom of Cambodia. The Bank manages, limits and controls the concentration of credit risk whenever it is identified. Large exposure is defined by the NBC as overall credit exposure to any individual beneficiary which exceeds 10% of the Bank’s net worth.
The Bank is required, under the conditions of Prakas No. B7-06-226 of the NBC, to maintain at all times a maximum ratio of 20% between the Bank’s overall credit exposure to any single beneficiary and the Bank’s net worth. The aggregate of large credit exposure must not exceed 300% 113 of the Bank’s net worth.
The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security in the form of collateral for loans and advances to customers, which is common practice. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types to secure for loans and advances to customers are:
• Mortgages over residential properties (land, building and other properties); • Charges over business assets such as land and buildings; and • Cash in the form of margin deposits.
(c) Impairment and provisioning policy
The Group is required to follow the mandatory credit classification and provisioning in accordance with the relevant Prakas as disclosed in Note 2.3.8.
2016 Annual Report 113
(Note 2.1) 392,146,365 696,205,178 4,901,117,078 3,811,863,195 3,811,863,195 801,090
KHR’000 USD KHR’000 25,000 101,250 96,826,263 941,200,789 197,800 1,210,152,365 100,925 KHR’000 (Note 2.1) equivalent equivalent 220,585,729 1,284,939,947 171,902,513 3,983,609,767 9,232,058 5,498,468,426
USD 25,000 54,641,003 318,290,797 986,774,775 2,286,861 1,362,018,436
101,250 KHR’000 (Note 2.1) equivalent 392,146,365 700,931,868 3,811,863,195 845,267 4,905,887,945
USD 25,000 96,826,263 173,069,597 941,200,789 1,211,330,357 208,708 Bank Group
(continued) (Note 2.1) 220,585,729 10,504,811 1,291,712,520 3,983,609,767 5,506,513,752 equivalent USD KHR’000 (CONTINUED) STATEMENTS 25,000 100,925
54,641,003 319,968,422 986,774,775 1,364,011,333 2,602,133 RISK MANAGEMENT THE FINANCIAL TO The credit exposure amounts arising from off balance sheet items are disclosed in Note 25 on commitments and contingencies. The credit exposure amounts arising from off Maximum exposure to credit risk before collateral held or other enhancements Maximum exposure to credit risk before collateral held or other enhancements of the Group and Bank follows:
Balances with the NBC Balances with other banks Loans and advances AFS investment AFS Other assets
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 2015 2016 2015 2016 27.2 risk (continued) Credit (d)
114 2016 Annual Report Total USD 47,705,315 52,915,368 377,211,558 902,666,285 1,380,498,526 - - USD Others 2,602,133 2,602,133 - - - - AFS USD 25,000 25,000 investment - USD roup advances Loans and 47,705,315 52,915,368 115 1,003,261,968 902,641,285 - - USD other banks 319,968,422 319,968,422 - Balances with
- - USD (continued) the NBC 54,641,003 54,641,003 - Balances with (CONTINUED) STATEMENTS RISK MANAGEMENT G THE FINANCIAL Others - community, social Others - community, and personal activities Real estate Financial intermediaries Concentration of risks financial assets with credit risk exposure same the in activities or business activities, similar in engaged are counterparties of number when a arise Concentrations be to obligations contractual meet to ability their would cause that features economic similar or have region, geographic of the sensitivity the relative indicate Concentrations conditions. or other political economic, by changes in affected similarly a particular industry or geographic location. performance to developments affecting Group’s of the Group and An analysis of concentration risk of counterparty by industry. of credit concentration The Group monitors credit risk as at the balance sheet date is shown below: the Bank’s 2016 TO (e)
Manufacturing
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
2016 Annual Report 115 Total USD (16,487,193) 1,364,011,333 5,506,513,752 USD Others 2,602,133 - 10,504,811 AFS USD 25,000 100,925 - investment USD roup advances Loans and (16,487,193) 986,774,775 3,983,609,767
USD other banks 319,968,422 - Balances with 1,291,712,520
USD (continued) the NBC 54,641,003 220,585,729 - Balances with (CONTINUED) STATEMENTS RISK MANAGEMENT G THE FINANCIAL Concentration of risks financial assets with credit risk exposure (continued) 2016 Less allowance for losses on loans and advances Equivalent in KHR’000 (Note 2.1) TO (e)
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
116 2016 Annual Report USD Total 66,411,165 50,617,726 270,260,196 1,227,323,148 1,227,323,148 4,905,887,945 840,034,061 (15,992,791) 1,211,330,357
- - USD Others 208,708 208,708 208,708 845,267 - - - - - AFS USD 25,000 101,250 - 25,000 25,000 investment USD Group 155,628 advances Loans and 66,411,165 66,411,165 50,617,726 957,193,580 840,009,061 117 3,811,863,195 941,200,789 (15,992,791) - - USD other banks 173,069,597 173,069,597 - Balances with 173,069,597 700,931,868 - - - USD (continued) the NBC 96,826,263 96,826,263 - Balances with 96,826,263 392,146,365 - (CONTINUED) STATEMENTS RISK MANAGEMENT
THE FINANCIAL Less allowance for losses on loans and advances Equivalent in KHR’000 (Note 2.1) Others - community, social Others - community, and personal activities Real estate Manufacturing Financial intermediaries Concentration of risks financial assets with credit risk exposure (continued) 2015 TO (e)
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
2016 Annual Report 117 USD Total 47,705,315 52,915,368 375,218,661 902,666,285 (16,487,193) 5,498,468,426 1,362,018,436 1,378,505,629 - - USD Others 9,232,058 2,286,861 2,286,861 2,286,861 - - - - - AFS USD 25,000 100,925 25,000 - 25,000 investment - USD Bank advances Loans and 47,705,315 52,915,368 (16,487,193) 3,983,609,767 986,774,775 1,003,261,968 902,641,285 - - USD other banks 318,290,797 318,290,797 Balances with 1,284,939,947 318,290,797 - - - - USD (continued) the NBC 54,641,003 54,641,003 220,585,729 54,641,003 - - Balances with (CONTINUED) STATEMENTS RISK MANAGEMENT
THE FINANCIAL Equivalent in KHR’000 (Note 2.1) Less allowance for losses on loans and advances Others - community, Others - community, social and personal activities Real estate Financial intermediaries Concentration of risks financial assets with credit risk exposure (continued) 2016 TO (e)
Manufacturing
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
118 2016 Annual Report Total USD 66,411,165 50,617,726 269,082,204 (15,992,791) 4,901,117,078 1,210,152,365 1,226,145,156 1,226,145,156 840,034,061 - - USD Others 197,800 197,800 801,090 197,800 - - - - - AFS USD 25,000 101,250 25,000 25,000 - investment USD Bank 155,628 advances Loans and 66,411,165 50,617,726
957,193,580 119 (15,992,791) 3,811,863,195 840,009,061 941,200,789 - - USD other banks 171,902,513 171,902,513 696,205,178 171,902,513 - - Balances with - - USD the NBC (continued) 96,826,263 96,826,263 392,146,365 96,826,263 - - Balances with (CONTINUED) STATEMENTS RISK MANAGEMENT
THE FINANCIAL Equivalent in KHR’000 (Note 2.1) Less allowance for losses on loans and advances Others - community, social Others - community, and personal activities Real estate Manufacturing Financial intermediaries Concentration of risks financial assets with credit risk exposure (continued) 2015 TO (e)
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
2016 Annual Report 119 Total USD 25,000 54,641,003 319,968,422 (16,487,193) 1,364,011,333 5,506,513,752 1,380,498,526 2,602,133 1,003,261,968 - - - USD Impaired 8,382,158 8,382,158 8,441,751 2,091,095 - (6,291,063) - - - USD but not Past due impaired (371,429) 48,482,937 12,009,645 12,381,074 -
- - - USD grade Group 58,204,736 12,381,074 58,204,736 (581,761) Substandard 232,623,950 57,622,975 - -
USD 25,000 598,284,555 275,689,000 319,968,422 2,404,145,184 (2,756,890) Standard grade 595,527,665 2,602,133 Neither past due nor impaired - -
USD (continued) High grade 54,641,003 703,246,003 648,605,000 2,812,819,930 696,759,953 - (6,486,050 ) (CONTINUED) STATEMENTS
RISK MANAGEMENT
THE FINANCIAL Equivalent in KHR’000 (Note 2.1) Less allowance for losses on loans and advances Other assets AFS investment Loans and advances Balances with other banks Credit quality of loans and advances the Group Bank are summarized as follows: 2016 Balances with the NBC Credit quality TO (f)
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
120 2016 Annual Report USD Total 25,000 96,826,263 957,193,580 173,069,597 208,708 (15,992,791) 1,211,330,357 4,905,887,945 - - - USD Impaired 7,088,516 1,227,323,148 7,088,516 2,783,294 - (6,401,283) 687,233
- - - USD but not Past due impaired 4,208,242 4,208,242 16,505,921 4,075,536 - (132,706)
- - - USD grade Group 69,909,035 69,909,035 Substandard 280,300,950 - 69,210,111 (698,924) 121 -
USD 25,000 39,430,882 212,734,187 173,069,597 212,339,878 859,976,505 208,708 (394,309) Standard grade - -
USD Neither past due nor impaired (continued) 96,826,263 High grade 933,383,168 836,556,905 - (8,365,569) 925,017,599 3,746,321,275 (CONTINUED) STATEMENTS RISK MANAGEMENT
THE FINANCIAL Equivalent in KHR’000 Less allowance for losses on loans and advances Other assets AFS investment Loans and advances Balances with other banks Balances with the NBC Credit quality of loans and advances the Group Bank are summarized as follows: 2015 Credit quality (continued) TO (Note 2.1) (f)
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
2016 Annual Report 121 Total USD 25,000 54,641,003 318,290,797 (16,487,193) 1,362,018,436 1,378,505,629 2,286,861 1,003,261,968 5,498,468,426 - - - USD Impaired 8,382,158 8,382,158 2,091,095 8,441,751 - (6,291,063)
- - - USD but not Past due impaired (371,429) 12,009,645 12,381,074 48,482,937 -
- - - USD grade Bank 58,204,736 12,381,074 58,204,736 (581,761) Substandard 57,622,975 232,623,950 - -
USD 25,000 596,291,658 275,689,000 318,290,797 (2,756,890) 593,534,768 2,286,861 2,396,099,858 Standard grade - -
USD Neither past due nor impaired (continued) 54,641,003 High grade 703,246,003 648,605,000 - (6,486,050) 696,759,953 2,812,819,930 (CONTINUED) STATEMENTS RISK MANAGEMENT
THE FINANCIAL Equivalent in KHR’000 Less allowance for losses on loans and advances Other assets AFS investment Loans and advances Balances with other banks (Note 2.1) Balances with the NBC Credit quality (continued) Credit quality of loans and advances the Group Bank are summarized as follows: 2016 TO (f)
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL
27.2 risk (continued) Credit
122 2016 Annual Report Total USD 25,000 96,826,263 957,193,580 171,902,513 (15,992,791) 4,901,117,078 1,210,152,365 197,800
- - - USD Impaired 7,088,516 1,226,145,156 7,088,516 (6,401,283) 687,233 2,783,294 -
- - - USD but not Past due impaired 4,208,242 4,208,242 4,075,536 - (132,706) 16,505,921
- - - USD grade Bank 69,909,035 69,909,035 Substandard 280,300,950 - 69,210,111 123 (698,924) -
USD 25,000 39,430,882 211,556,195 171,902,513 211,161,886 197,800 855,205,638 (394,309) Standard grade - -
USD Neither past due nor impaired (continued) 96,826,263 High grade 933,383,168 836,556,905 - (8,365,569) 925,017,599 3,746,321,275 (CONTINUED) STATEMENTS RISK MANAGEMENT
THE FINANCIAL Equivalent in KHR’000 Less allowance for losses on loans and advances Other assets AFS investment Loans and advances Balances with other banks Balances with the NBC Credit quality of loans and advances the Group Bank are summarized as follows: 2015 (Note 2.1) Credit quality (continued) TO (f)
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.2 risk (continued) Credit
2016 Annual Report 123 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
27. FINANCIAL RISK MANAGEMENT (continued)
27.2 Credit risk (continued)
(f) Credit quality (continued)
(i) Loans and advances neither past due nor impaired
Loans and advances that are not past due are not considered impaired, unless other information is available to indicate the contrary.
(ii) Loans and advances past due but not impaired
Loans and advances less than 90 days past due are not considered impaired, unless other information is available to indicate the contrary.
(iii) Loans and advances individually impaired
In accordance with NBC Prakas No. B7-00-51 dated 17 February 2000 on the classification and provisioning for bad and doubtful debts, loans and advances more than 90 days past due are considered impaired and a minimum level of specific provision for impairment is made depending on the classification concerned, unless other information is available to indicate the contrary.
The Group holds collateral against loans and receivables in the form of real estate and chattel mortgages, guarantees, and other registered securities over assets. Estimates of fair value are based on the value of collateral assessed at the time of borrowing.
124 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
27. FINANCIAL RISK MANAGEMENT (continued)
27.2 Credit risk (continued)
(f) Credit quality (continued)
As at balance sheet date, the Group and the Bank’s aging analysis of past due but not impaired loans are shown below:
2016 2015 30 to 60 days 61 to 90 days 30 to 60 days 61 to 90 days USD USD USD USD
Overdraft 1,536,242 1,700,260 150,548 102,117 Fixed loans 5,005,530 3,823,338 2,190,604 1,640,888 125 Housing loans 179,319 60,611 91,800 - Credit card facilities - 75,774 - 32,285 Total financial assets 6,721,091 5,659,983 2,432,952 1,775,290 Equivalent in KHR’000 (Note 2.1) 27,133,044 22,849,352 9,853,456 7,189,924
(g) Repossessed collateral
During the year, the Bank did not repossess any collateral held as security.
27.3 Market risk
The Group takes on exposure to market risk, which is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market prices. Market risk arises from open positions in interest rates, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices.
The Group does not use derivative financial instruments such as foreign exchange contract and interest rate swaps to hedge its risk exposure.
2016 Annual Report 125 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
27. FINANCIAL RISK MANAGEMENT (continued)
27.3 Market risk (continued)
(i) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Group’s functional currency. The Group maintains a policy of not exposing itself to large foreign exchange positions. Any foreign currency exchange open positions are monitored against the operating requirements, pre-determined position limits and cut-loss limits.
As at 31 December 2016, balances in monetary assets and liabilities denominated in currencies other than USD are not significant. Therefore, no sensitivity analysis for foreign currency exchange risk was presented.
(ii) Price risk
The Group is not exposed to price risk of securities because it does not hold any investments classified on the balance sheet as marketable securities.
(iii) Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest margins may increase as a result of changes and may reduce losses in the event that unexpected movements arise. The management of the Group at this stage does not have a policy to set limits on the level of mismatch of interest rate re-pricing that may be undertaken; however, management regularly monitors the mismatch.
The Group has no significant financial assets and liabilities with floating interest rates. Balances with the NBC, balances with other banks, and loans and advances earn fixed interest rates and deposits from other banks and customers have fixed interest rates.
27.4 Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence of this may be the failure to meet obligations to repay depositors and fulfill commitments to lend.
126 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
27. FINANCIAL RISK MANAGEMENT (continued)
27.4 Liquidity risk (continued)
The Group’s management monitors balance sheet liquidity and manages the concentration and profile of debt maturities. Monitoring and reporting take the form of the daily cash position and projection for the next day, week and month respectively, as these are key periods for liquidity management. Management monitors the movements of the main depositors and projection of their withdrawals.
The table in Note 28 is an analysis of the assets and liabilities of the Group by relevant maturity based on the remaining period at the balance sheet date to the contractual or estimated maturity dates. 127 27.5 Fair value of financial assets and liabilities
Fair value represents the amount at which an asset could be exchanged or a liability settled on an arms-length basis. As verifiable market prices are not available, market prices are not available for a significant proportion of the Group’s financial assets and liabilities. Fair values, therefore, have been based on management assumptions according to the profile of the asset and liability base. In the opinion of the management, the carrying amounts of the financial assets and liabilities included in the balance sheet are a reasonable estimation of their fair values. In making this assessment, the management assumes that loans and advances are mainly held to maturity with fair values equal to the book value of loans adjusted for allowance for loan losses, if any.
27.6 Capital management
The primary objectives of the Group’s capital management are to ensure that it complies with externally imposed capital requirements and it maintains strong financial position and healthy capital ratios to support its business and to maximize shareholder’s value.
The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholder’s, return capital structure, or issue capital securities. No changes were made in the objectives, policies and processes from previous years.
2016 Annual Report 127
(Note 2.1) 980,103,215 (24,867,477) 4,725,507,928 20.21%
2015 KHR’000 USD KHR’000 242,000,794 (6,140,118) 1,166,792,081 20.21% Bank KHR’000 (Note 2.1) equivalent equivalent 980,965,727 (23,310,524) 5,280,332,304 18.14%
2016 USD 242,993,740 (5,774,219) 1,307,984,222 18.14%
KHR’000 (Note 2.1) equivalent 982,228,579 38,191,023 4,620,057,381 22.09%
2015 USD 242,525,575 9,429,882 1,140,754,909 22.09% Group (continued) (Note 2.1) 984,015,428 39,545,566 5,173,750,861 19.78% equivalent 2016 USD KHR’000 (CONTINUED) STATEMENTS
243,749,177 253,544,958 1,023,560,994 251,955,457 1,020,419,602 237,219,521 957,655,203 235,860,676 955,235,738 9,795,781 1,281,583,072 19.78% RISK MANAGEMENT THE FINANCIAL TO Capital management (continued) As at balance sheet date, the Group complies with 15% solvency ratio prescribed by NBC as shown in table below:
capital I Tier has Bank the Group and the believes Management on NBC regulations. based computed assets are risk-weighted worth and Net complied with all externally imposed capital requirements. Tier II capital Tier Net worth Total risk-weighted Total assets Solvency ratio
NOTES as at 31 December 2016 and for the year then ended 27. FINANCIAL 27.6
128 2016 Annual Report NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
28. LIQUIDITY RISK
Financial assets
Analysis of financial assets into maturity groupings is based on the expected date on which these assets will be realized. For other assets, the analysis into maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date or if earlier the expected date the assets will be realized.
Financial liabilities
The maturity grouping is based on the remaining period from the end of the reporting period to the contractual maturity date. When counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Group can be required to pay. 129
2016 Annual Report 129 USD Total 25,000 2,697,817 52,676,930 986,774,775 242,853,971 980,401,481 2,602,133 1,416,688,263 1,162,907,531 8,228,944 1,173,834,292
- - 54,641,003 - 319,968,422 - - date USD 25,000 No fixed maturity (16,462,193) (66,457,873) (16,487,193) (16,462,193) - - -
- - - - 165,785,359 669,275,494 165,785,359 - - - Over 5 years
- - - - >1 to 5 years
409,966,488 1,655,034,712 409,966,488 - - - Group - - - - - USD >6-12 months 160,325,665 409,966,488 165,785,359 164,828,744 164,828,744 - (4,503,079) (18,178,929) 160,325,665 - - -
>3-6 months 51,000,000 124,645,834 31,740,241 128,135,353 156,386,075 124,645,834 - - - - - >1-3 USD
months 12,000,000 99,123,437 105,386,075 147,783,765 596,603,059 164,000,000 275,123,437 127,339,672 127,339,672 - - - USD (CONTINUED) STATEMENTS
1 month and up to 2,697,817 52,676,930 42,641,003 62,674,944 On demand 104,968,422 2,602,133 265,563,432 746,093,281 8,228,944 757,020,042 (491,456,610)
(1,984,010,335)
RISK (continued)
THE FINANCIAL liabilities . hand on
investment TO
financial assets and liabilities based on the remaining period to repaymentMaturity dateprofile is of as the Group and the Bank’s follows Financial assets Cash Net liquidity surplus (gap) 2016 Equivalentin KHR’000 (Note 2.1) Balances with the NBC Balances with other banks Loans and advances and Loans AFS Other assets Total financial assets Total Financial Deposits from other banks Deposits from customers Other liabilities Total financial liabilities Total NOTES as at 31 December 2016 and for the year then ended 28. LIQUIDITY
130 2016 Annual Report USD Total 25,000 5,871,647 48,363,809 96,826,263 40,000,000 996,353,327 173,069,597 941,200,789 212,112,116 5,357,076 1,047,582,050 1,259,694,166 208,708 859,054,069
------date USD 25,000 No fixed maturity (15,992,791) - - - (15,967,791) (15,967,791) (64,669,554)
- - - -
525,060,654 Over 5 years 525,060,654 525,060,654 2,126,495,649 - - -
- - -
367,207 143,689,312 >1 to 5 years 367,207 143,689,312 143,322,105 580,454,525 - -
------131 USD
>6-12 months 67,255,190 Group 122,950,710 (55,695,520) (225,566,856) 122,950,710 67,255,190 - -
- - >3-6
months 3,000,000 86,312,300 65,088,823 86,312,300 68,088,823 - - (18,223,477) (73,805,082)
- - - - >1-3 USD months 19,119,201 70,000,000 40,000,000 - 113,925,380 153,925,380 - -
(64,806,179) (262,465,025) 89,119,201
- - USD (CONTINUED) STATEMENTS 1 month and up to 5,871,647 On demand 48,363,809 96,826,263 672,797,730 100,069,597 136,980,400 (301,577,676) 5,357,076 684,026,453 208,708 382,448,777 (1,221,389,588)
RISK (continued)
THE FINANCIAL hand on investment TO 2015 Financial assets Cash Deposits from other banks Equivalent inKHR’000 (Note 2.1)
Balances with the NBC Deposits from customers
Balances with other banks Borrowings Loans and advances Other liabilities AFS financial Total liabilities Other assets Net liquidity surplus (gap) Financial liabilities financial assets Total NOTES as at 31 December 2016 and for the year then ended 28. LIQUIDITY
2016 Annual Report 131 USD Total 25,000 2,697,817 52,676,273 54,641,003 318,290,797 986,774,775 2,286,861 1,414,694,709 1,184,695,136 8,228,944 1,195,621,897 219,072,812 884,396,942
- - - - - date USD 25,000 maturity No fixed - (16,487,193) (16,462,193) (16,462,193) (66,457,873) - -
- - - - - USD
165,785,359 165,785,359 165,785,359 669,275,494 - - - Over 5 years
------
409,966,488 409,966,488 409,966,488 - - - >1 to 5 years 1,655,034,712 - - - - - USD >6-12 months
160,325,665 160,325,665 170,122,847 - 170,122,847 - (9,797,182) (39,551,224) Bank - - - - >3-6 months
51,000,000 105,386,075 156,386,075 127,025,397 - 118,529,057 127,025,397 29,360,678 - - - >1-3 USD months 12,000,000 99,123,437 164,000,000 275,123,437 130,977,775 130,977,775 144,145,662 581,916,037 - -
- USD (CONTINUED) STATEMENTS 1 month and up to 2,697,817 52,676,273 42,641,003 62,674,944 On demand 756,569,117 103,290,797 2,286,861 263,569,878 (503,926,000) (2,034,349,261) 8,228,944 767,495,878 RISK (continued)
THE FINANCIAL liabilities investment TO
2016 Financial assets Cash on hand
Balances with the NBC Balances with other banks Loans and advances AFS Other assets Total financial assets Total Financial Deposits from other banks Deposits from customers Other liabilities Total financial liabilities Total Net liquidity surplus (gap) Equivalent in KHR’000 (Note 2.1)
NOTES as at 31 December 2016 and for the year then ended 28. LIQUIDITY
132 2016 Annual Report
USD Total 25,000 5,871,647 48,363,449 96,826,263 40,000,000 171,902,513 941,200,789 1,017,198,383 5,357,076 1,068,427,106 190,088,708 197,800 769,859,267 1,258,515,814 ------date 25,000 maturity No fixed (15,992,791) (15,967,791) (64,669,554) - - - (15,967,791) ------525,060,654 525,060,654 - - Over 5 years 525,060,654 2,126,495,649 ------
367,207 143,689,312 367,207 143,322,105 580,454,525 143,689,312 - - >1 to 5 years ------133 >6-12 months 67,255,190 127,770,124 (60,514,934) 127,770,124 67,255,190 - - (245,085,483) Bank - - - - - >3-6 3,000,000 months 89,025,696 65,088,823 89,025,696 68,088,823 - - (20,936,873) (84,794,336) - - - >1-3 USD months 19,119,201 70,000,000 117,064,612 89,119,201 - - (67,945,411) (275,178,915) 157,064,612 - 40,000,000 - USD
(CONTINUED) STATEMENTS 1 month 5,871,647 and up to 48,363,449 96,826,263 98,902,513 682,970,744 136,980,400 On demand 5,357,076 694,199,467 197,800 381,270,425 (312,929,042) (1,267,362,619)
RISK (continued)
THE FINANCIAL investment TO 2015 Financial assets Cash on hand Deposits from other banks
Balances with the NBC Deposits from customers Balances with other banks Borrowings Loans and advances Other liabilities financial liabilities Total AFS Net liquidity surplus (gap) Other assets Equivalent in KHR’000 (Note 2.1) financial assets Total Financial liabilities
NOTES as at 31 December 2016 and for the year then ended 28. LIQUIDITY
2016 Annual Report 133 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
29. SEGMENT REPORTING
Segment information is presented in respect of the Group’s business since the Bank and its subsidiaries operate their businesses in the Kingdom of Cambodia only.
The Group comprises the following main business segments:
Commercial Banking
Business banking provides a full range of financial services to business customers, ranging from large corporate and the public sector, to individual customers. The products and services offered include long-term credit such as project financing, short-term credit such as overdraft and trade financing and fees based services such as cash management and custodian services.
Insurance
The insurance segment includes the business of underwriting of all classes of general insurance businesses.
Securities and brokerage
The securities segment includes the business of securities underwriting, dealing and brokerage.
134 2016 Annual Report USD 61,356,778 82,002,559 13,922,210 85,842,476 (19,555,183) Consolidated (588,991) (12,538,207) (1,090,598) 48,229,580 48,818,571 415,677,690 102,966,978 3,202,292 194,702,814
- USD 774,556 (191,411) (774,556) (430,418) Elimination - - - (6,105,418) (1,512,365) (890,536)
- USD (4,096) 458,043 178,446 (8,682) (4,586) (462,139) brokerage 1,849,120 458,043 279,597 - 2016 Securities and
-
USD 135 Insurance 1,319,112 2,582,868 2,124,623 (1,263,756) 1,202,023 10,427,038 2,582,868 458,245 - (117,089)
banking 14,113,621 47,625,230 60,041,762 79,736,204 83,969,825 Commercial (18,603,844) (12,416,532) (1,090,598) 409,506,950 101,438,432 3,354,986
USD
(CONTINUED) STATEMENTS (Note 2.1) (continued) REPORTING THE FINANCIAL TO Equivalent in KHR’000 Net income attributable to equity holder of the Bank Attributable to minority interest Net income for the year Income tax expense Income before income tax Provision for losses on loans and advances General and administrative expenses Segment results: Operating income Equivalent in KHR’000 (Note 2.1)
Others Fee and commission
Revenue: External NOTES as at 31 December 2016 and for the year then ended 29. SEGMENT
2016 Annual Report 135 USD 59,664,045 80,947,847 14,061,506 79,178,710 (20,561,563) Consolidated 47,088,191 392,618,016 96,942,720 3,702,504 190,707,174 (11,984,369) (591,485) (722,239) 47,679,676
-
USD 987,700 (987,700) (152,784) (709,605)
Elimination - - (6,481,162) (1,600,287) (737,898) -
- USD 75,236 2015 317,734 (192,622) (510,356) brokerage (195,802) (3,180) 1,286,823 317,734 242,498 - Securities and
- USD Insurance 1,320,690 2,530,405 2,147,466 (1,209,715) 10,248,140 2,530,405 382,939 - (113,578) 1,207,112
banking 58,535,977 79,087,408 14,214,290 77,665,613 Commercial 387,564,216 (19,829,192) 46,668,366 95,694,868 3,814,965
(11,867,611)
(722,239)
USD
(CONTINUED) STATEMENTS (Note 2.1) (continued) REPORTING THE FINANCIAL TO Equivalent in KHR’000 Net income attributable to equity holder of the Bank Attributable to minority interest Net income for the year Income tax expense Income before income tax Provision for losses on loans and advances General and administrative expenses Segment results: Operating income Equivalent in KHR’000 (Note 2.1)
Others Fee and commission Revenue: External NOTES as at 31 December 2016 and for the year then ended 29. SEGMENT
136 2016 Annual Report USD USD Consolidated Consolidated 5,797,924,911 4,808,639,665 4,316,862,579 6,482,028,541 1,191,141,854 1,065,891,995 1,605,654,828 1,431,586,398
USD USD
Elimination Elimination (89,395,001) (85,698,308) (22,143,919) (21,160,076) (37,713,919) (36,730,076) (152,251,098) (148,756,808)
USD USD 96,428 111,074 448,406 390,533 brokerage brokerage 44,115,496 44,233,403 10,927,792 10,921,828 Securities and Securities and
USD USD 137 Insurance Insurance 8,320,584 7,829,015 2,061,081 1,933,090 61,983,105 56,796,143 15,353,754 14,023,739
banking banking Commercial Commercial 4,889,265,676 4,394,341,339 USD 6,528,181,038 USD 5,845,652,177 1,211,113,618 1,085,022,553 1,617,087,203 2015 1,443,370,908 (CONTINUED) STATEMENTS (continued) REPORTING THE FINANCIAL TO Segment liabilities Segment liabilities Equivalent in KHR’000 (Note 2.1) Segment assets Equivalent in KHR’000 (Note 2.1) Segment assets Segment liabilities Segment liabilities
2016 Assets and liabilities Segment assets Assets and liabilities: Segment assets NOTES as at 31 December 2016 and for the year then ended 29. SEGMENT
2016 Annual Report 137 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2016 and for the year then ended
30. SUBSEQUENT EVENTS
Other than as disclosed elsewhere in these financial statements, at the date of this report, there were no events which occurred subsequent to 31 December 2016 that had significant impact on the financial position of the Group as at 31 December 2016.
31. TAX CONTINGENCY
The taxation system in Cambodia is relatively new and is characterized by numerous taxes and frequently changing legislation, which is often unclear, contradictory and subject to interpretation. Often, differing interpretations exist among numerous taxation authorities and jurisdictions. Taxes are subject to review and investigation by a number of authorities, who are enabled by law to impose severe fines, penalties and interest charges. These facts may create tax risks in Cambodia substantially more significant than in other countries. Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation. However, the relevant authorities may have differing interpretations and the effects since the incorporation of the Bank could be significant.
32. EXCHANGE RATES OF USD AND APPLICABLE FOREIGN CURRENCY AGAINST KHMER RIEL AT YEAR END
2016 2015 KHR KHR
USD 4,037 4,050 MYR 906 949 EUR 4,287 4,451 SGD 2,806 2,878
138 2016 Annual Report CALENDAR OF SIGNIFICANT EVENTS 2016
18 January 2016
Public Bank’s 50th Anniversary celebration was witnessed by 250 staff from Campu Bank Head Office jointly with Campu Securities Plc. and Campu Lonpac Insurance Plc. which was held at the Sunway Hotel, Phnom Penh.
29 January 2016
Campu Bank donated USD1,150 for the fifth consecutive year to the Nokor Tep Foundation which is undertaking construction of a new hospital in Phnom Penh to treat women’s 139 various ailments.
31 January 2016
Campu Bank supported the fund raising Walkathon organized by Nokor Tep Foundation by sending 10 staff to participate in the Walkathon which was participated by more than 700 participants.
7 & 8 March 2016
Campu Bank donated USD3,000 to the “Nodojiman Japanese Song Contest 2016” organized by the Embassy of Japan in Cambodia in collaboration with the Cambodia-Japanese Cooperation Centre (CJCC) to encourage students to showcase their linguistic skills in Japanese.
2016 Annual Report 139 CALENDAR OF SIGNIFICANT EVENTS 2016
26 March 2016
Campu Bank conducted a walk-in interview campaign to recruit new staff at the Campu Bank Building.
The walk-in interview campaign was a success as it attracted more than 200 enthusiastic applicants.
27 & 28 March 2016
Campu Bank sponsored USD1,500 for the BUAYA Club Tournament which is organized annually at the Grand Phnom Penh Golf Course and Garden City Golf Country Club, Phnom Penh and participated by members who are mainly expatriates and professionals working and residing in Cambodia.
8 April 2016
Campu Bank was awarded with the “Top Payment Volume Award”, “Top Credit Card Payment Volume Award”, “High Average Spending by Credit Affluence Award” and “Champion Security Award - Best in Class for Cambodia” by the VisaCard at the Visa Card Client Appreciation Night 2016 which was held at the Topaz Restaurant in Phnom Penh.
3 May 2016
Campu Bank opened its 29th Branch at Krong Chbar Mon, Kampong Speu Province which is located about 44 km west of Phnom Penh City.
140 2016 Annual Report CALENDAR OF SIGNIFICANT EVENTS 2016
3 May 2016
Campu Bank opened its 30th Branch at Boeng Tumpun, Phnom Penh which is situated about 8 km south of Phnom Penh City. The Branch is headed by Ms Heng Kimteang.
6 June 2016
As part of the Bank’s continuous effort to provide excellent services to customers, Campu Bank launched Customer Care Campaign - Phase 2 with the theme sub-tagline, “We Listen We Care” 141 from 6 June 2016 until 31 August 2016 to garner feedback from customers with the objective of improving our processes and customer service.
13 June 2016
Cambodian Public Bank was awarded “USD 2015 Straight-Through-Processing Excellence Award” for its exceptionally high accuracy in the processing of outward payments for the 5th consecutive year by Deutsche Bank, New York one of the top 5 providers in USD clearing in the United States.
13 June 2016
Cambodian Public Bank signed a Memorandum of Understanding with the Ministry of Economy and Finance (MEF) as a tax collecting agent on behalf of the General Department of Taxation (GDOT).
2016 Annual Report 141 CALENDAR OF SIGNIFICANT EVENTS 2016
22 to 24 June 2016
Campu Bank hosted the “Engaging People for Peak Performance” external course which was attended by a total of 30 staff from Campu Bank, Public Bank Vietnam and Public Bank Laos Operations which was held in Phnom Penh.
6 August 2016
Campu Bank celebrated its 24th Anniversary Dinner for all staff including Campu Lonpac Insurance and Campu Securities which was held at Sokha Phnom Penh Hotel & Residence, Phnom Penh.
6 August 2016
4 high achiever staff for the “Staff-Get- Member” credit card campaign were awarded with “Appreciation Certificates” by the Regional Head, Mr Phan Ying Tong at the Bank’s 24th Anniversary Dinner.
6 August 2016
29 staff from Campu Bank Head Office and Branches with service of between 10 and 35 years were awarded with the Long Service Recognition Awards during the Bank’s 24th Anniversary Dinner.
142 2016 Annual Report CALENDAR OF SIGNIFICANT EVENTS 2016
9 August 2016
The Bank received the “Pioneer Investor in Cambodia” award by Matrade (National Trade Promotion Agency under the Ministry of International Trade and Industry Malaysia) in recognition of the Bank’s pioneer position as a foreign investor in Cambodia and contributions towards promoting Malaysia- Cambodia trade relations.
19 August 2016
Staff of Campu Bank/Campu Securities Plc./ Campu Lonpac Insurance Plc. receiving the Special Commemorative mementoes to mark Public Bank’s 50th Anniversary. 143
31 August 2016
In conjunction with Malaysia’s 59th Merdeka Day celebration, the Malaysian Business Council in Cambodia organised a dinner for its members and business community at the Nagaworld Hotel, Cambodia which was graced by His Excellency Dato’ Sri Hasan Malek, the Malaysian Ambassador to the Kingdom of Cambodia.
19 September 2016
Campu Bank held its 6th Business Working Session in Phnom Penh which was chaired by Dato’ Chang Kat Kiam, Deputy Chief Executive Officer of Public Bank Berhad.
2016 Annual Report 143 CALENDAR OF SIGNIFICANT EVENTS 2016
19 September 2016
Tan Sri Dato’ Sri Tay Ah Lek, Managing Director of Public Bank Berhad, and Dato’ Sri Lee Kong Lam, Co-Chairman and the Members of the Board of Cambodian Public Bank paid a courtesy visit to His Excellency Chea Chanto, the Governor of the National Bnak of Cambodia.
19 September 2016
The Annual Meeting between Members of the Board of Directors of Campu Bank and the National Bank of Cambodia (NBC) for the supervisory review of the Bank’s operations was chaired by Her Excellency Neav Chanthana, Deputy Governor of NBC and attended by other Senior Officials from the Central Bank.
4 November 2016
Campu Bank sponsored 100 Campu Bank travelling sport bags for the National Environmental Pupil - Drawing Award Competition Programme which was organized by the Ministry of Environment.
26 November 2016
Campu Bank sponsored 70 PB Shoe bags as souvenirs for the participants of the 1Malaysia Ambassador Cup 2016 tournament which is open to all Malaysian golfers who are working and residing in Cambodia.
144 2016 Annual Report CALENDAR OF SIGNIFICANT EVENTS 2016
8 December 2016
Campu Bank donated a sum of USD15,743-80 for the construction of a 610-metre long red gravel road in Prek Kmeng Commune, Lavea Em District, Kandal Province which is under the auspices of the Ministry of Economy and Finance.
8 December 2016
Campu Bank was awarded with the “Leadership in Issuing Volume 2015-2016” by the MasterCard at the Indo-China Customer Forum 2016 which was held in Da 145 Nang, Vietnam.
2016 Annual Report 145