SIEM REAP: OSK Holdings Bhd is moving beyond investment banking and is growing its commercial banking business at a rapid pace.

In Cambodia, the group owns a commercial bank called Indochina Bank Ltd, which will be a gateway for OSK to tap the strong growth that the Indochina region is expected to experience in the next few years.

The group made its entry into Cambodia in October 2008, when it started its commercial bank there. In two years, OSK Indochina Bank has opened nine branches. It plans to launch two new branches a year to strengthen its presence in the country.

OSK officially launched four new branches last Friday.

With its business scope expanding, OSK expects its Cambodian operations to start contributing positively to the group’s bottomline by next year.

“By next year, there will be contributions [from the Cambodian operations to the group’s profits]. I think there will be at least 5% return on investment next year and it will keep increasing from there,” said Ong Leong Huat, OSK group managing director and CEO.

“Banks will have a great advantage in participating in the country’s growth and we are confident that Cambodia holds a lot of potential. We do not have the slightest doubt about our investments here,” added Ong, who is also the major shareholder of OSK.

OSK Indochina Bank made a profit before tax of RM234,000 for 1H2010 ended June 30.

Cambodia, an emerging economy, had enjoyed double-digit growth before the global financial crisis. Its economy is expected to have strong growth of 5% for this year.

“We have already opened eight branches in the two years that we have been here, which is similar to a 100m sprint. But we are here for the long haul and we are looking at two new branches every year. We want to move into the lower-tier cities,” Lim Loong Seng, OSK Indochina’s chief operating officer and country head, said at the opening of the newest branches last Friday.

Apart from its main office in Phnom Penh, OSK Indochina also opened its first four branches in the city, Cambodia’s capital, late last year.

Lim noted that the investment for each branch was in the region of US$500,000 (RM1.5 million).

With less than 10% of Cambodia’s 14 million population being bank customers, Lim said there was plenty of room for growth.

He added that the bank was also exploring its options in the e-banking segment to reach a wider network of clients. Pending approval from the Cambodian authorities, OSK intends to launch its Internet banking in the second half of next year.

Other than OSK, Public Bank Bhd and Malayan Banking Bhd also own commercial banking businesses in Cambodia.

Currently, OSK Indochina’s focus is on commercial banking. However, the group will be branching out into stock broking soon.  Last month, OSK announced that its subsidiary, OSK Indochina Securities Ltd (OSKISL), was granted a licence to undertake securities underwriting, dealing and brokerage, and investment advisory in Cambodia.

Cambodia has yet to establish its stock exchange but the Securities and Exchange Commission of Cambodia has officially granted 15 companies, including OSKISL, licences to act for its first stock exchange.

The country has delayed the launch of its stock exchange twice now due to the global economic crisis and technical issues. The Cambodia Securities Exchange (CSX) is expected to commence operations in July 2011.

Neighbouring Vietnam started its stock market in July 2000, while Laos launched its securities exchange last month.

This article appeared in The Edge Financial Daily, November 8, 2010.