Commercial Bank sees a year of consolidation
View(s):The Commercial Bank says it is mighty proud to be the only private Sri Lankan bank with branches overseas.
So much so, that their branch in Bangladesh adds 15 per cent to Commercial Bank’s bottomline. “We are very unique as a Sri Lankan private bank. In addition to the branch in Bangladesh we have a joint operation in the Maldives and we are operating a micro financing licence in Myanmar. In the last two years we ventured out to Myanmar and the Maldives,” S. Renganathan, Managing Director Commercial Bank told the Business Times in an interview.
He added that 65 per cent of their initial investment in the Bangladesh operation which started in 2006 has been repatriated to Sri Lanka. “This is a country that requires foreign exchange. So we are proud to assist the country to earn foreign exchange.”
Mr. Renganathan noted that Commercial Bank started the Myanmar operation in 2016 as a rep office. “At the time we were assisting the Sri Lankan corporates In Myanmar to enter into the Myanmar market in different industries. Then we noticed an opportunity in that country to enter into the micro finance operation. Myanmar has a very regulated micro finance market. As a result now we operate in the micro financing space.” He said they do not face any competition from Sri Lankan operators in the same micro financing market.
Consolidation
When asked if regional expansion is on the cards this year, Mr. Renganathan explained that venturing overseas isn’t easy. “We are always looking at feasible locations to venture into but that is not going to happen this year,” he said adding that 2019 is a year of consolidation.
However, local expansion is on the cards. Commercial Bank aims to expand through digital methods. “We want to expand into tech savvy branches. We pioneered ABC which stands for Automated Banking Centres. These are units which assist customers to have more convenience digitally,” Mr. Renganathan added. He said that ABC will be in areas in the western as well as other provinces.
The bank has focused on small and medium enterprises sector (SME) for the last three decades. Recently the growth rate in the SME sector has been dipping. This is mostly because most of Commercial Bank’s SME customers have graduated into the corporate sector, Mr. Renganathan noted. Now the bank is increasing its focus on acquiring new SME.
S. Renganathan
The banking sector has been hit hard by Non-Performing Loans (NPL) last year. Mr. Renganathan acknowledges that last year was the worst since 2008 and 2009. However the Commercial Bank has a different approach when tackling NPLs.
Mr. Renganathan noted that his team, when confronted with NPLs, analyses the reasons behind non-payment by customers. “Why is the borrower having difficulties in making his payment? When we posed this question, we came up with various reasons. It is not only the country economic conditions and the macro environment that prohibits them from making that repayment.” Among the reasons, he noted there were over spending of budgets, lack of proper planning and management. “These were the major causes. Once we gauge their reasons, we try to address this by either extending the repayment of the particular customer, advising them to dispose some of that assets and bringing down the outstanding, etc.”
He said that Commercial Bank pioneered a business club for SME customers called “ComBank Biz Club”. “This club is on invitation only. We take into account how SME customer accounts are operated during the last six months and then invite them for this club. When joining they are recognised with a special card with attached discounts and other such facilities. But the important aspect is that the data that we collect which translates into management information are sent to the particular branches that these customers operate in. Then the management of the branches engages in relationship management with these SME. The first relationship management concept for SME sector was initiated by Commercial Bank for the sector, “he explained noting that now this club has nearly 5000 members. The Commercial Bank NPL figures are much below those of the industry, Mr. Renganathan noted.
He said that Basel III capital adequacy ratio requirements are met by the bank. “We prepared an internal capital adequacy document for the bank which assisted us to face the Basel III requirement.” However he noted that IFRS 9 (SLFRS 9) has a certain impact on the banks capital. The bank has performed a provisional calculation for SLFRS 9 and has estimated the total additional loan loss provision as at 31 December of last year on adoption of SLFRS 9 to be in the range of 25 per cent to 35 per cent. “The bank also noted that the total estimated additional loan loss provision as at December 31, 2017 on adoption of SLFRS 9 is expected to be in the range of 30 per cent to 35 per cent compared to the total impairment provision determined as per LKAS 39. Accordingly, the increase in impairment provision based on SLFRS 9, had it been effective as at December 31, 2017, would have reduced the group’s/ bank’s net assets by approximately 4.5 per cent to 5.5 per cent and the total Capital Adequacy Ratio by 60 to 75 basis points.”
He added that Commercial Bank has further growth plans within Sri Lanka and also in overseas markets they operate in with focus on Fin Tech products and unique products that stand out. “The last few months alone we have introduced several ‘Sri Lanka’s first products’ some partnering with international and local giants. Commercial Bank launched Sri Lanka’s first fully-fledged digital bank account, Flash, with advanced features to facilitate financial management and financial wellness. We introduced WeChat Pay, one of the largest Chinese Payment platforms to Sri Lanka targeting Chinese tourists. The bank also launched Union Pay Cards, with the largest card issuer in the world, UnionPay International, making Sri Lanka its 51st country to issue Unionpay Cards. We launched a novel Credit Card where customers get free data when they use their Mobitel connection called ComBank Mobitel Data + Credit Card and partnered with Sri Lanka Insurance(SLIC) to offer exclusive benefits and offers to Credit Card SLIC Motor Plus Credit Card to SLIC Motor Plus customers,” he added.