Cargills Bank forges ahead with bankable model
Cargills may be new to the world of banking but it’s already a winner, using its own large network of Food City outlets, rather than opening several new bank branches. Through this an unconventional banking model that relies on Fast Moving Consumer Goods (FMCG) style, the bank aims to drive business through over 300 Cargills Food City outlets, and its new chairman Rajendra Theagarajah firmly believes that this is the way to go.
He says for Cargills Group, this 3-year old subsidiary’s business model is clear. “The Cargills Bank isn’t following the model of brick and mortar, because they have a strategic opportunity of 300 plus points of openings already (Cargills Food City outlets) and it’s a strategic opportunity. So the brick and mortar equation doesn’t arise,” he told the Business Times adding that this bank won’t follow the traditional model.
He said that Cargills Bank may open maybe one branch in each province, but they aim to really drive their brand through Food City outlets by a ‘hub and spoke’ model of development. He said that there are Food City outlets from Thanamalwila to Nelliady and anyone goes to Food City for groceries, vegetables, medical drugs, daily needs, etc and since these units aren’t out-of –the way, the connect is there for customers to carry out their banking as well. “So we think like an FMCG and not as a conventional bank,” he added. Currently the bank has 15 branches and 436 employees.
Also the new kid on the block believes in digitisation to a great deal. “We believe in digitisation to a great deal. We are believers in mobile technology banking. This can be deployed for basic banking requirements and we’ll push this aspect as well,” Mr. Theagarajah added. The Cargills Group invested Rs.1,276 million and Rs.2,533 million in Cargills Bank Ltd and accordingly 88,000,000 and 174,696,905 additional shares were issued on May 10 and June 30 last year.
In March 2017 CT Properties Ltd issued 32.6 million ordinary shares at Rs 10 each to the company by converting Rs. 326,000,000 debt due to the company. As a result, the holding percentage of the company in CT Properties Ltd increased from 15.63 per cent to 21.76 per cent. Mr. Theagarajah noted that the founding Page family got regulator sanction at the onset when Cargills Bank started to hold 65 per cent in it. They are mindful of the timelines to shed the majority holding and to hold the maximum of 15 per cent, he said.
“With the founding family at the helm it’s easy to steer this bank in the path that it should go in now.”
He said that Cargills will go public as all banks must but there still are certain critical things that they want to roll out before that. “We want three full years of operating profit before going public. We just turned a corner last year and before calling the public, we need to show some profit.”
Cargills deposits were at Rs. 10 billion against Rs. 9.4 billion as at last December while customer advances was at Rs. 15.5 billion against Rs. 13.4 billion in 2015.