Cambodian banks’ bad loans ratio to peak at 7.7% in 2026

Its tourism and real estate sectors continue to lag behind the economy.

Cambodian banks’ asset quality is expected to deteriorate over the next two years with the share of bad loans peaking in 2026, warned S&P Global Ratings.

Lingering effects by the pandemic meant that sectors hit by it the hardest– tourism and real estate– continue to lag behind the broad economy, the ratings agency noted.

Non-performing loans (NPLs) in Cambodia’s broader financial system are expected to increase over 2024-2025, and peak at 7.7% of total loans in 2026, according to estimates by S&P Global Ratings analyst Ruchika Malhorta.

"This reflects concentrated loan books in sectors that are lagging the broad recovery, delays in recognition, and cautious loan growth magnifying NPL ratios,” Malhorta said.

By sector, tourism spending remains lower than pre-pandemic levels. This is dragging on tourism-related sectors (such as retail trade), which account for 17% of Cambodian banks’ loans, Malhorta noted.

Real estate, which makes up about a fifth or 20% of lending, remains in a slump. 

“As one example, condo prices have slumped to 2013 prices and big buyers of these units are Chinese investors--many of whom are suffering from China's own property downturn and slow economic recovery,” Malhorta said.

Malhorta expects improvements in Cambodia’s banking sector moving forward.

“The tough lessons of this episode could also lead to structural improvements in the banking sector. Slower lending growth, less concentrated loan books, and better provisioning should over time improve the risk-reward scenario for Cambodian banks,” she said.

The Cambodian government is reportedly investing more deeply in building out and improving its logistical infrastructure. This and efforts to move up the value chain in manufacturing could diversify economic drivers, Malhorta said.