Opportunities for growth are many in the coming years, was the key message delivered when Mirror Business sat down with Sampath Bank Chief Operating Officer (COO) for an interview recently.
Despite the obvious hiccups all banking and financial entities have to deal with, Sampath Bank COO Nanda Fernando is confident his entity will continue to sail smoothly. Confident since he believes the entity has mastered the formula to become Sri Lanka’s most future-ready bank. Sampath Bank PLC, since establishment has been recognised a trendsetter in terms of banking technology. With its incorporation in 1986 the local banking and finance industry saw the launch of many ‘first of its kind’ products that revolutionised the sector. Determined to be the front runner in the highly competitive industry, Sampath Bank’s strategy in this regard is to stay ahead of the game by embracing new trends and extending its reach. In a brief discussion, Fernando spoke to Mirror Business on a number of areas, giving us a glimpse on the bank’s can-do attitude, aspirations, and determination to reach greater heights.
Following are the excerpts of the interview:
By Shabiya Ali Ahlam
Could you walk us through the performance of the bank this year? How as it fared compared to previous years?
We are determined to grow from strength to strength and I can confidently say that is what we have been doing over the years, if not decades. Focusing on this year, I can say that in the first six months we have done well in all areas. If I were to focus on the main three sources of income; interest income, total other income, and fee based income, we have exceeded expectations. Compared to the previous years, there is significant growth in all areas.
Since our establishment we have been revolutionising the banking industry. We kicked off with a fully automated foundation where we introduced online banking, extended banking hours and ATM cards. Due to those key differences we were different from the others. It is about making our services accessible to all citizens.
The success was mainly due to IT supremacy and we were focused on adding convenience and improving customer service. We continue to build on these core strengths.
Our first 22 years of existence was focused on the reach and today we have 226 branches island wide. However, over the last five years we were about building capacities and volumes into the newly established and extended branch network.
Now our focus is to simplify our processes and work on the consolidation front. For that we have changed our business model. We are moving from our traditional brick and mortar structure to a system where customer can interact with ease to carry out his/her banking function throughout the year outside the banking hours.
It is such efforts that have allowed us to reach greater milestones and internal targets.
You won two awards this year. What was done differently from other banks?
Yes. Just weeks ago we were bestowed with two prestigious international awards for our proficiencies in a wide array of facets within the banking industry of the country.
We were recognized by ‘The Euromoney’ as ‘Sri Lanka’s Best Bank 2016’ and by ‘World Finance’ as ‘The Best Retail and Commercial Bank in Sri Lanka 2016’’. This double recognition elevates Sampath Bank on to a higher pedestal.
It is for the third time that the Sampath Bank has been recognized as the ‘Best Commercial Bank 2016’ and for the third consecutive year as ‘Best Retail Bank 2016’ in Sri Lanka.
Making us standout is the keenness to evolve with the times. Such changes ensured that our deposits grew at a faster rate than anticipated. Our advances and the total assets grew faster than expected thus improving profits after tax.
These awards are an overall assessment of the bank’s performance and as a result our operational excellence, cost optimisation, and other focuses helped us bring a strong sense of growth in the bank. Our balance sheet has also grown according to anticipated levels. These are the results of our efforts.
The current status of the local banking and finance landscape, what is your take in that regard? Is it conducive enough to fulfil the bank’s aspirations?
At any point of time the macroeconomic conditions of the country does have an impact on the progress of the industry. In general, at any given time there could be turmoil, either globally or locally. Volatility could be experienced in the global sense whilst there could be policy changes in the local context.
Therefore depending on the strategy of the country, banks would have to adjust and meet the best conditions based on the prevailing circumstances. The circumstances which currently exist are partially due to deliberate decisions made by the government due to policies, and partially due to uncontrollable issues that we experience in the industry. So, us banks, or any business should accept these conditions as a normal part and parcel of our job. By taking that into account we must adjust our direction to reach our ultimately plan and objective.
I would not say that the current condition, which is a mix of global and local impact, is not conducive. The industry should be able to look at the conditions and adjust accordingly is what I would stress.
Currently we have both challenges and opportunities. We have to get our direction right depending on the conditions.
Where is the room for improvement?
With the development projects that are yet to kick off, there are a plethora of opportunities. Under the Megapolis there are lots of developments to the Western province. These are all opportunities and it is imperative we recognise that. The large projects will definitely have an impact and these are opportunities for the bank to get involved.When these projects are implemented and expanded, there would be increase in shared resources and cash circulation.
Today, one of the major challenges faced is that we don’t have the young people with the required talent and knowledge to work and help improve
the economy. With the collaboration of top universities we can expect to retain our young people, thus the foreign exchange.
So there will be good opportunities for the new investment projects to commence here. There are lots of potential in that area and many plans. If and when these plans are implemented, there would be good opportunities for us (banks) to be a part economy’s growth story.
Would you say there is a level playing field in the banking industry?
Yes. I do not think otherwise. The conditions are almost equal since the regulator ensures fairness. I cannot complain of unequal conditions.
We have seen ad-hoc policy decisions in the past few months. Has that in anyway impacted your functions and the way you execute your strategy?
It certainly has. Whenever the government introduces taxes and certain regulation, which impacts businesses, there is an impact on the bank as well. For example, if there is an increase in motor vehicle taxes, it will discourage motor vehicle imports. This it will have an impact on the foreignexchange moving out.
There are both the good and bad. The policy decisions are taken by the state, looking at the need of the country and looking ahead as to where they want a particular segment to reach in the next few years.
Our observation is that banks have a big opportunity to get involved in the implementation of the strategy through financing activities, mostly for the investors. The commencement of the projects will help us to move to a better level. It will help investors kick off more industrial based projects so that imports and the other reliance can be reduced.
What is the message you would like to hear from the Central Bank at this point of time?
The Central Bank would definitely put up regulations to meet some objective of the country’s strategic plan. There could be short term, medium term and long term objectives.
Sometimes the implementation and expectation to fulfil long-term objective may have short term implications to the general public and entrepreneurs. Therefore if the short term impact is to meet a long term objective, which will be beneficial to the country in general, then I feel such are needed for the country and as banks we must comply.
At the same time I feel compliance is necessary to meet certain regulatory requirements internationally, as well as locally. It is important that we bear in mind that we too try to meet this regulation which are required to manage risks. At the same time it would have a cost as well. When this cost of meeting regulatory requirement increase it may affect the cost of the product and services customers enjoy.
Managing the exchange rates, interest rates, and the liquidity in the market are requirements which the regulator would need to have acloser look. I am sure they are doing it. They should.
These are importance elements that need to be managed effectively as it has direct impacts on customers. This may help to improve and increase investments of our entrepreneurs. When the regulatory costs go up, it affects the end results of our services.
We need to be competitive and for that we need to be able to price our products with reasonable margins. This will affect the cost for which certain regulatory requirements may have an impact. Therefore the regulator may need to balance the need of imposing the regulation against the convenience and the cost.
This is something we would like some attention on.Our expectation is for the regulator to take into account the same so that the cost of the end product does not increase.
Now that you shared your expectations of the macro environment, what is the way forward for Sampath Bank?
Our objective is to create a culture within the bank and the industry to help customers enjoy their products in a convenient manner at a lower cost.
One of the major threats banking institutions face is the volatility due to cybercrimes. Although banks continue to invest in making their systems safer, hackers are coming out with newer techniques to break in. All the additional efforts taken come with a price. These may add on to the end product. We are striving to strike a balance in that sense.
Provided that the system support is there, the strategy will definitely help expand the customer base and allow each citizen to maintain a bank account. This will give them the ability to bank and manage their financials in a more methodical manner.
What are the challenges identified in the journey forward?
Reducing cost is one of the major challenges and that is our top priority. If we continue executing our plan we will ensure the cost can be brought down, which will benefit the customer and the bank. With this financial inclusion can be promoted.
I must stress that the Board of Directors (BOD) and the Chairman have continued to support is in the manner required. And this has helped us to move forward much faster. I would like to also point out that our staff carder is one of the best and most efficient in the industry.
We aim to to look after and add value to all our shareholders and comply with the regulatory requirements. That is how we would march forward to meet the requirements of the next decade.
What new can we expect from Sampath Bank?
There will be many new to come. Major changes will be seen in the coming months. Innovative products will be launched while existing produces will be improved. We will take further advantage of the core strengths we have, which is IT supremacy and the convenience factor, extended at a lower cost.
We ensure that we will continue to provide the best banking solution to citizens. We will aim at ensuring every Sri Lankan has a bank account, which in turn will ensure their financial management and quality of life.