Sri Lanka’s largest private bank, the Commercial Bank of Ceylon is actively looking at opportunities to venture overseas, with a view to establishing itself in developing economies with high growth potential.
The Bank is currently present in Bangladesh, Myanmar and the Maldives, and would ultimately like to have 15 percent of its assets (at Rs 930 billion at end June 2016) overseas, Managing Director and CEO Jegan Durairatnam discloses in this exclusive interview. Excerpts:
Over the past one year, Commercial Bank has commenced operations in two overseas locations. Why is venturing overseas important to the Bank?
We would like a certain part of our balance sheet to be exposed to foreign assets, which is why venturing overseas is important. We look at markets which are at an early stage of development, and have growth potential. These are markets which we need to venture into now, considering that because Sri Lanka is a relatively small country, it will be more difficult to venture into such markets once they have grown and matured. Wherever opportunities exist, we look at whether those markets fit in to our core ambitions and core capabilities and take a decision on whether we should venture into them. It is understood that we cannot grow only in Sri Lanka, and we model our approach on that of some of the global banks.
Commercial Bank’s first overseas operation – Bangladesh, is now 13 years old. How has it contributed to the Bank’s growth and evolution?
Bangladesh now accounts for 10 percent of our bottomline and 8 percent of our assets, eventhough the operation consists of only 18 branches, as against 251 in Sri Lanka. The average value of the facilities we have offered in Bangladesh is high, because we are catering to the top end of the customer base in that country.
One of the biggest benefits of venturing into Bangladesh 13 years ago is that it has helped us learn how to set up and manage an overseas operation, which we can replicate in other countries.
Bangladesh is also still a growing economy with substantial potential, and we expect it to contribute further to our growth. We will have to expand our branch network there in areas that will enable us to serve more customers at the top end, but we are also looking at serving SMEs in as the Bangladeshi economy grows.
Interacting with a new culture by venturing overseas gives our staff valuable new perspectives. It contributes not only to the evolution of the bank but to the development of our staff as well. The exposure widens their horizons and makes them better employees.
Myanmar does not look like an obvious location for a Sri Lankan bank. What was the rationale for opening an office there, and how has that operation progressed?
Our Myanmar operation is still in a very early stage of development. It is a market that we need to be in for some years before we can establish ourselves and grow. The cultural affinity between the two countries is helpful. There is a lot of respect for Sri Lanka because of the country’s large Buddhist population. Our representative office in Yangon is already helping many Sri Lankan companies that are looking at setting up on Myanmar. This results in the Bank increasing its Sri Lankan customer base as well.
Commercial Bank’s most recent overseas operation was in the Maldives. What are your expectations from that operation?
We have been offering corporate banking services to Maldivian businesses from Sri Lanka for many years, but there is a substantial retail capability we can harness by going to the Maldives. Even our corporate clients have significant numbers of staff that we can serve in their individual capacities. Opening a branch in Malé is just the first step. Given the diversity of products we can offer, we don’t see any difficulty in competing in the market. At the moment, our strategy is to focus on retail banking. We want to do different things in the Maldives, such as Franchisee Banking on mobile platforms, as well as by offering access to our services via mobile phones. The emphasis is going to be on innovative technology-facilitated banking rather than brick-and-mortar branches.
Given the fact that Maldives is made up of more than 1,200 islands, how does the Bank expect to offer services to people not resident in Malé?
That is where mobile technology will play a big role. The Maldives has a very tech-savvy populace and the country’s young people are very enthusiastic. It is an exciting market to penetrate with technological innovation.
Do you think the technology model adopted for the Maldives could also help the Bank reach more Sri Lankans in remote areas?
We believe that the franchisee banking model is the future for Sri Lanka too. This involves working with other companies and organisations that have a large number of customer touch points, to collect deposits on behalf of the Bank. There are companies in Sri Lanka that have large and well-spread branch networks. We are also focussing a lot of attention on assisted automated branches, several of which are already functioning in Sri Lanka, as a means of increasing access for the masses and enhancing convenience.
Your next overseas operation is expected to be Italy. Can you outline what is proposed for Italy and what your expectations for that operation are?
We expect our fully-owned money transfer operation to grow very well. There are large numbers of Sri Lankans spread all over Italy. The next step is to appoint franchisee agents who will collect remittances on our behalf. We are currently working on getting Bank of Italy approval for the model, which once set up, will provide a safe and legal method for our people in Italy to send money to Sri Lanka. One of the principal reasons to venture into Italy is to promote transfer of funds via a legally acceptable channel. This will enable the Bank to help build an eco-system for a new economy, where continuous remittances can be the basis for further support from the Bank to recipients through personal loans, business loans, housing loans, educational loans and so on.
The idea is to encourage those who are sending and receiving money from Italy to think beyond simply consuming the remittances. We are looking at building a new remittance segment by being in a position to deal directly with senders and resolve any issue relating to remittances in that market. In this, the trust factor plays a key role. Because Commercial Bank is a trusted name, Sri Lankans in Italy would have no reservations about handing over their money to our own remittance houses.
Where would Commercial Bank want to be next, and why?
We would like to have 15 percent of our assets overseas. We would like to be present in most countries in South Asia, such as Nepal and Bhutan and even in India and Pakistan, where entry is relatively difficult.