Commercial Bank of Ceylon PLC, headquartered in Colombo, Sri Lanka, will soon celebrate a century of service. With its roots tracing back to Eastern Bank Ltd., which opened its first branch in 1920, this inventive financial institution is the country’s most awarded bank, receiving recognition from numerous financial publications and other local and foreign independent organizations for its many innovations and contributions to the banking industry. Guided by its mission to provide “reliable, innovative, customer-friendly financial services, utilizing cutting-edge technology and focusing continuously on productivity improvement whilst developing our staff and acquiring necessary expertise to expand locally and regionally”, it has grown over the years to dominate the Sri Lankan banking industry. Today, Commercial Bank is the third-largest bank in Sri Lanka but the largest private-sector commercial bank, with assets valued at US$7.123 billion at the end of 2018, accounting for approximately 11 percent of the sector’s assets. It serves more than three million customers and employees more than 5,000 staff in Sri Lanka as well as in its overseas operations in countries such as Bangladesh, Myanmar and the Maldives. It boasts of a large network of 267 branches and 852 ATMs across the country. Commercial Bank is the only Sri Lankan bank to have been ranked among The Banker’s Top 1000 World Banks for 9 consecutive years. In 2018 alone, it won more than 40 local and international awards. It was also honored by being included in the “10 Most Admired Companies” in Sri Lanka for two years running, an award presented by Prime Minister Ranil Wickremesinghe on behalf of the International Chamber of Commerce Sri Lanka (ICCSL) and the Chartered Institute of Management Accountants (CIMA).
Mr. Renganathan, thank you for talking with us today….
The bank’s financial performance in 2018 showed considerable improvement vis-à-vis 2017, with the advances and deposits portfolios growing by 16.77 percent and 15.63 percent respectively during the year. To what main factors do you attribute this growth?
Commercial Bank recorded impressive growth in all key areas in 2018—rising above the challenges of increased taxation and an increasing level of non-performing advances faced by the entire industry. Commercial Bank once again proved its resilience by increasing market share amidst a challenging market environment by providing an adequate cushion against non-performing advances, robust and prudent assets, and liabilities management, and maintaining a stable and growing profitability. We are especially proud to have improved our cost-to-income ratio amidst a volatile macroeconomic scenario.
In 2018, Commercial Bank’s overseas operation continued its steady growth momentum, contributing a healthy percentage to the group profits. The bank incorporated a fully owned subsidiary, CBC Myanmar Microfinance Company Ltd in Nay Pyi Taw, Myanmar, in addition to its existing representative office in the country.
However, the bank’s gross NPL (nonperforming loan) ratio has increased from 1.88 percent to 3.24 percent. What is the main reason for this?
The increased NPL ratio is an industry issue. The rising NPL ratio is a result of the rapid credit growth experienced by the sector in the past years concurrent to a slowing or a stagnant economy. Asset-quality deterioration is another key reason for rising NPLs. The prevailing macroeconomic and political issues are putting pressure on the consumers, resulting in them being unable to service facilities obtained. We have taken adequate measures to face this challenge, and improvements are expected in the fourth quarter.
What steps have been taken recently by your organization to strengthen customer services?
Customer-service excellence is and has been one of the most important aspects of our service offering. We do understand that excellent customer service is a combination of robust and advanced infrastructure, a versatile product offering and competent people carrying out their duties with passion.
The passionate and professional team of the bank is our biggest asset, and we are proud to have a team of customer-service champions serving our customers. The bank makes substantial investments in training the team members and updating their knowledge to empower them to serve customers efficiently and confidently. The bank has its own training centre and ensures that the front-line staff is fully equipped with not only product knowledge but also with skills and characteristics such as problem-solving, empathy, time management and communication. This is a key focus area in the bank’s training calendar.
The bank operates a strategically located branch network of 267 branches with over 800 ATMs (automated teller machines). A substantial number of our branches have extended banking hours or are located in supermarkets to provide extended banking services to customers. Commercial Bank has pioneered many concepts that facilitate customer convenience, such as supermarket banking, holiday banking and Automated Banking Centers (ABC Branches) in Sri Lanka. Apps such as e-Passbook, a first of its kind in South Asia, allow customers to access their accounts at the click of a button. The latest innovative product introduced by the bank for the first time in Sri Lanka is the Flash Digital Bank Account, which goes beyond the services of a normal account, offering customers facilities such as financial planning and financial management. The bank also launched Over the Air PIN (OTAP) for the first time in the country, eliminating the need for customers to wait for their PIN numbers to arrive by post. Our digital channels are equipped with state-of-the-art technology to create the utmost convenience for customers. We focus on introducing technology that matters to our customers and make substantial investments in technology.
Commercial Bank ensures that our product portfolio caters to all key segments of society, meeting their exact requirements. We believe in delivering customized banking solutions to our individual or corporate customers.
What is the bank’s Assets and Liabilities Committee (ALCO), and what are its main objectives?
ALCO is the apex body for managing the interest rate and liquidity risk of the bank. The functions and responsibilities of ALCO are set out by the ALCO policy of the bank and operationalized through the Asset and Liabilities Management (ALM) policy.
ALCO is supported in its activities by the ALCO subcommittee, which studies and recommends to ALCO on various technical issues. It also oversees the funds-transfer pricing mechanism of the bank.
The responsibilities of ALCO include developing an assets-and-liabilities management process and related procedures, establishing a monitoring-and-reporting system, developing assets-and-liabilities strategies and tactics, overseeing the maintenance of a management information system that supplies, on a timely basis, the information and data necessary for the ALCO to fulfill its role as assets-and-liabilities manager of the institution.
What are some of the most significant ways in which online-banking customers can benefit by banking with the Commercial Bank of Ceylon?
Commercial Bank’s online-banking platform is the most subscribed online payment portal in the country, facilitating utmost customer convenience through a diverse range of fund-management options for both individual and corporate customers.
The personal online-banking platform offers an exceptional range of features, such as fund transfers between accounts maintained in different international currencies; cross-currency payments, which are possible 24/7 covering six major currencies; checking balances of current, savings, investment, loan and credit-card accounts; transferring funds between a customer’s own accounts and to registered third parties who have Commercial Bank accounts on a real-time basis around the clock; real-time fund transfers to any bank in Sri Lanka on the CEFTS (Common Electronic Fund Transfer Switch) network 24/7; payments and fund transfers via Commercial Bank credit cards for customers who do not want to use the money in their bank accounts; online payments for airline bookings; applications for personal loans and housing loans; investing in Treasury bills and effecting payments for share trading.
Commercial Bank’s online-banking platform has been further enhanced with the introduction of electronic fixed deposits (e-FDs) in both local and foreign currencies. The e-FD facility is available 24/7, 365 days of the year, to Sri Lankan citizens and holders of non-resident foreign currency (NRFC) accounts, resident non-national foreign currency (RNNFC) accounts, resident foreign currency (RFC) accounts and FC Plus accounts in the domestic-banking section. Foreign currency e-FDs may be opened in four major currencies: the US dollar, Great Britain’s pound, euro or Australian dollar.
Additionally, customers can apply for personal loans through online banking and get instant feedback on the status of their loans.
The sophisticated corporate online-payment platform facilitates corporates to effect virtually all payments, ranging from employee salaries, statutory payments such as EPF (Employees’ Provident Fund) and ETF (Employees’ Trust Fund), commissions, interest and insurance payments, dividend payments, bulk utility payments and duty payments to Sri Lanka Customs.
For corporates, Commercial Bank also offers Paymaster—a sophisticated online bulk-payments platform that is widely used by companies to pay employee salaries, commissions and numerous other payments to their suppliers and customers.
The digital channels of Commercial Bank of Ceylon have been bestowed with numerous awards over the years from both prestigious local and foreign awarding bodies, which is a testament to the superior quality of services offered by the digital channels.
Can you briefly explain some of the key features of the bank’s smart-phone FLASH app? What makes this app unique compared to other banking apps?
The bank recently launched the Flash Digital Bank Account that goes beyond a normal banking app or a mobile wallet. It features never-before-seen personal financial-management tools that encourage, empower and embolden users to better engage with their finances, make wise choices about spending and saving and, in so doing, enrich their own financial wellness.
The account has all of the features of a normal mobile-banking app or a mobile wallet, such as allowing users to send and receive money to and from bank accounts or phone numbers or QR codes facilitating payments to multiple users at the click of a button, paying bills through your mobile phone and a debit card that users can utilize to withdraw money or to purchase at merchant points. But the most unique feature in this account is that FLASH helps users to manage their financial wellness. The FLASH budget manager tracks debit-card spending in real-time and alerts the user as to how much they have spent and creates dashboards of their budget goals. The FLASH savings manager helps users to identify and create savings goals and automate them so that they can be achieved in a realistic manner. FLASH even lets users invest their money in savings instruments, term deposits, insurance and more.
In terms of CSR (corporate social responsibility) projects, the bank seems to be heavily involved in healthcare in particular. What are some of the most significant specific healthcare initiatives the bank supports? And have you seen any positive results being generated from your involvement?
The Commercial Bank CSR Trust was established in 2004. The main focus of this trust has been uplifting education, and improving healthcare is the secondary pillar that the trust has been working on.
Over the years, our main focus has been supporting the government hospitals with the necessary infrastructure in paediatric and maternal health sectors. The CSR Trust of the bank works closely with health-sector officials to identify pressing needs in these sectors.
The latest initiative supported by the bank is the Raindrops Project, attempting to combat chronic kidney disease of unknown origin (CKDu) through rainwater harvesting. It began as a pilot seeking a practical method of combating the spread of chronic kidney disease of unknown origin in Sri Lanka’s dry zone, based on the premise that harvested rainwater would be a viable and healthier alternative to the polluted groundwater believed to be one of the causes of the high incidence of the disease. The bank supported this project and provided rainwater-harvesting facilities to 25 families of Ginnoruwa, located in the Girandurukotte area. At the end of a one-year test period, the results we have seen are extremely encouraging, and the bank has dedicated substantial resources to take this project forward. It is extremely encouraging to note that other organizations have also come forward to provide rainwater storage tanks to the villagers.
The bank’s education project Smart Schools sounds like a worthwhile endeavour. Can you briefly explain what is involved, and what the project aims to accomplish?
Education is the main pillar of our CSR journey. The bank has worked extensively in the field of IT (information technology) education. Our journey began with the donation of IT laboratories to schools island-wide, and we have donated 180 to date. We also commenced online learning initiatives and launched the online learning portal called Sipnena. This provides students free access to educational content, in line with local syllabi. Taking online education further, the bank also empowered the teachers with certifications from Cisco Systems.
Leveraging the 180 computer labs already donated by the bank to schools around the island, the new initiative seeks to create “smart schools”, where students and teachers use these IT facilities to improve knowledge and skills in subjects such as English, mathematics and science for the GCE Ordinary Level and bioscience and mathematics for the Advanced Level.
Working with Headstart (Pvt) Ltd., the company that owns the Guru.lk educational website, Commercial Bank has employed a panel of academics to develop curriculum based on new content that will be part of the learning-management systems that will be installed in the computers of school IT labs and will be accessible from external computers as well.
The objective is to create a new platform for students and teachers to interact with each other after school hours, download course materials and teaching guides, and engage in extra work that could make a difference in their pass rates at the GCE Ordinary and Advanced Level examinations.
What do you consider to be the bank’s most pressing challenges in the coming years?
The main challenge will be the rising NPLs, which we already discussed above.
It’s the positive economic conditions and the stable political environment that drives the sector and increases investor confidence. Inflation affects lending growth; therefore, it is a challenge to keep it under control.
The consumption patterns of customers and customer demographics such as an ageing population and the emergence of the Millennials as a customer segment will significantly alter the composition of the industry.
Apart from these, the biggest challenge the industry will face will be from the evolving technology that will keep all of us on our toes trying to stay relevant. It is paramount that banks keep abreast of these trends and evolve accordingly, or face the risk of being irrelevant, especially in the retail-banking space. The entrance of fintechs and technologies such as blockchain and artificial intelligence (AI) will pose both opportunities and challenges for the sector.
Mr. Renganathan, I’m convinced that Commercial Bank of Ceylon will make the most of these opportunities and challenges. Thank you very much for your time today.