Asiamoney best bank awards 2019: Sri Lanka
Best domestic bank: NDB Bank
|Dimantha Seneviratne, NDB Bank|
NDB Bank’s evolution into Sri Lanka’s best-run lender didn’t happen overnight. The bank started life as a development lender in 1979, and was privatized and listed on the Colombo Stock Exchange in 1993.
Each year since, it has taken another step forward, establishing itself as a firm member of the country’s elite banking fraternity. It isn’t the largest lender (a few of its peers claim a higher market value), but for many years it has been the fastest-growing bank of scale.
In the nine months to the end of September 2018, NDB’s net interest income grew at a faster annualized pace than at any of its three main commercial banking rivals; that was also true of its rate of growth for pre-tax and post-tax profit. It reported a higher return on assets than any of its peers over the same period and, at 2.6%, a lower ratio of non-performing loans to total lending. Customer deposits rose 20.2% year on year in the third quarter of 2018, nearly twice the rate of its nearest competitor, while total loans expanded 19.2%.
Dimantha Seneviratne, group chief executive, tells Asiamoney that being Sri Lanka’s most profitable bank “matters, but so does our high morale, the roll-out of new initiatives, and everyone working toward one goal”.
One such initiative is NDB Neos: the first of these fully digital and paperless branches was unveiled in Colombo, and NDB plans to roll out more around the country.
At the heart of its ‘Transformation 2020’ plan – which aims to reinforce its position as a systemically important lender – are its small and medium-sized enterprise clients, with NDB extending complex services, including supply chain finance, to smaller firms.
Its premium banking division also enjoyed a triple boost in 2018, courtesy of a 24% year-on-year increase in deposits, the opening of three new dedicated high net-worth branches and the launch of Islamic banking services that adhere to Shariah law.
Best corporate and investment bank: NDB Investment Bank
|Darshan Perera, NDB Investmetn Bank|
Sri Lanka’s capital markets are shallow by regional standards. Chunky initial public offerings and M&A deals are rare, while most debt sales are limited in scale. Yet the industry has talent, as demonstrated by NDB Investment Bank.
Whenever a deal is announced, be it of the pioneering or the run-of-the-mill variety, the Colombo-based investment bank is likely to be involved. During the review period, NDBIB raised SLRs60 billion ($335 million) for its clients, marking a year-on-year increase of 10%. Given the lack of a standout deal in 2018 – no big-ticket IPO or outsized M&A transaction – the investment bank channelled its resources into the deals that mattered most.
Vajira Kulatilaka, NDB Investment Banking Cluster chief executive, and Darshan Perera, NDB Investment Bank chief executive, pointed to a host of notable deals finalized during the review period when they spoke with Asiamoney in Colombo; most of these deals involved local firms restructuring or buying local or foreign assets, and foreign investors tapping into south Asia’s freest and most open market.
They highlighted NDBIB’s role as financial adviser to state-run lender HDFC Bank’s sale of additional tier-1, Basel III-compliant bonds and, in November 2018, as joint manager on National Savings Bank’s $100 million capital-raising, the first fully offshore US dollar-denominated debt sale by a Sri Lankan lender.
Other milestone deals include the acquisition of People’s Merchant Finance by Sterling Group, with NDBIB advising the Japanese buyer in a deal that included a SLRs1.4 billion equity infusion. It also advised Dubai-based Al-Futtaim Group, helping to flesh out a sustainable strategy for its local unit AMW Capital Leasing, and securing a mandate to restructure and refinance SLRs7 billion of the non-bank finance company’s debt.
Best international bank: HSBC
|Mark Prothero, HSBC|
HSBC has been a trailblazer in Sri Lanka’s banking market virtually from the day it opened its doors in Colombo in 1892. Standard Chartered and Citi, the other viable candidates for this award, both have a solid and long-standing presence in the market. But neither can compete with HSBC, which focuses its time and resources on four areas: credit cards, premium banking, big Sri Lankan corporates and foreign multinationals working onshore.
And it is in the categories book-ending these four areas where HSBC really makes its mark. The lender has a 25% market share in credit card receivables and spend. Mark Prothero, chief executive for Sri Lanka and the Maldives, points out that it remains the go-to bank for global corporates looking to take advantage of the island’s nexus of free-trade deals with the likes of India, Europe and Singapore, as well as its open economy, pro-business environment and attractive climate.
HSBC’s strength in Africa, Asia and the Middle East, allied to its status as the most influential and omnipresent foreign bank in China – the source of most of the new FDI inflows into Sri Lanka in 2018 – means it’s likely to remain a strong candidate for this award for years to come.
Its main rival in future years could well hail not from New York or London but from Beijing, with Bank of China keen to become the biggest and best foreign lender in Sri Lanka. We will see.
Best for premium banking services: NDB Bank
NDB Bank, winner of the award for best bank in Sri Lanka, scoops this prize too, in recognition of its years of consistent effort, innovative thinking and fruitful labour. NDB’s premium banking service, Privilege Banking, has taken off in recent years. It opened three new dedicated centres in 2018, serving NDB’s 7,305 high net-worth customers – or anyone who maintains a deposit of more than SLRs5 million ($27,800) with the bank. Total HNW deposits rose 24% in 2018 to SLRs126 billion.
At one level, the numbers underscore the nascent state of premium banking in this south Asian island. But it is a business that will see strong growth in the years ahead thanks to the wealth generated by new corporate and institutional investors.
With HNW customers embracing premium-banking services, NDB Bank is finding new ways to hone and broaden its product offering. Its elite Privilege Select service, available to clients with more than SLRs20 million in deposits, includes wealth management and liability products in local and foreign currencies.
Its premium banking team told Asiamoney in Colombo in early 2019 that plans were already under way to further stratify its HNW customer base and to expand its product offering.
The Colombo-based lender also extends banking services to customers living outside Sri Lanka – mainly foreign nationals and retired professionals, resident in the likes of the US, UK, Australia and Canada.
Perhaps the biggest development in recent years was the launch in 2018 of ‘Shareek’, a range of premium Islamic banking services designed in accordance with Shariah law. NDB Bank is the first, and still the only, Sri Lankan lender to offer customized Shariah-compliant premium banking services onshore.
Best digital bank: People's Bank
|N Vasantha Kumar, People's Bank|
Digital banking in Sri Lanka is a work in progress. Several lenders in the private and public sectors are hard at work formulating pan-institutional digital platforms or bolting on new services, then proclaiming their effectiveness and pre-eminence.
This year, People’s Bank wins the award for best domestic digital bank. A venerable state-run institution that first opened in 1961, it is a colossus in its home market, with 745 branches and 14 million active customer accounts.
Some state banks, not just in Sri Lanka but around the world, neglect to invest properly in digital, preferring to lean on and leverage their physical presence. That is not the case for People’s Bank and its chief executive, N Vasantha Kumar.
At the end of 2018, the lender claimed to have 136 digital branches dotted around the country, staffed by 500 digital agents serving 165,000 digital customers. That’s a lot of digital.
It aims to more than double those figures this year, aided by an extra 500 digital marketing agents equipped with Wi-Fi-enabled tablets and sent out into the market to help customers embrace a paperless world. It claims to be able to open a digital bank account in just five minutes (down from two or three days previously) and to issue and activate debit cards in mere seconds.
Many older customers will surely be happy to stick with paper ledgers and physical tellers, but there is no doubt that People’s Bank is going all-in on digital, and for good reason – it has slashed error levels by 70% and boosted cross-selling rates by up to 60%.
In April 2018, the lender rolled out an updated mobile app that includes 33 new features. It was an immediate hit, downloaded 100,000 times in the three weeks after its launch. In total in 2018, 310,000 customers downloaded the app, which was used to complete one million financial and eight million non-financial transactions, cumulatively worth SLRs4 billion ($22 million).
Best bank for SMEs: Hatton National Bank
Hatton National Bank describes itself as a pioneer in small and medium-sized enterprise banking in Sri Lanka, and so it is. Most of the island’s lenders take the segment seriously, but no financial institution onshore does it as well, or as comprehensively.
Each year, HNB adds many new services that cater specifically to its clientele, and tweaks and improves a dozen more. HNB boasts 10 hubs for small enterprises dotted around the country, employing 39 dedicated relationship managers and serving 51,000 SMEs.
Small enterprises are the lifeblood of the lender. In the first nine months of 2018, SMEs accounted for 31% of bank-wide net interest income, 16% of deposits, and 32% of all loans, with term loans and overdrafts combining to make up 64% of the lending mix, followed by leases and development loans (both 11%).
When HNB announces an upgrade or a new service, you can be sure that serving its smaller corporate clientele is in the forefront of its thinking. So, having spent SLRs400 million ($2.2 million) on an upgraded e-banking platform that included a cash-management service tailored to large corporates, HNB adapted the offering to cater to its small business clients.
In 2018, under the leadership of managing director and chief executive Jonathan Alles, the bank issued an additional 485 business cards to small and medium-sized firms, and approved SME insurance to 94 clients, provided by HNB Assurance. It also introduced a matchmaking solution for exporters seeking to target the German market, leaning on a long-standing collaboration with the development agency GIZ. And it continues to plough money into developing SME-focused digital services.
A partnership with Colombo-based e-commerce provider Webxpay helps smaller firms move to the digital economy, while a new software solution, HNB Appy, helps smaller companies to set up their own customised app-based site.
Best bank for CSR: Hatton National Bank
Rare is the Sri Lankan lender that fails to take corporate social responsibility seriously. It often feels like CSR is hard-wired into the industry, although perhaps that should not come as a surprise.
Sri Lanka remains a relatively poor country and still bears the scars of a 26-year civil war that only ended in 2009. Money for schools and hospitals, not to mention the cost of improving financial literacy, is in short supply, and banks are in most cases more than happy to turn provider.
At the head of the pack in Sri Lanka this year is Hatton National Bank, one of the island’s biggest lenders, and its leading provider of services to small and medium-sized enterprises.
HNB is also a pioneer in CSR, and its drive to ensure a better future for all – not just its customers – starts from within. The bank measures its internal level of power consumption (in kilowatt hours) and carbon dioxide emissions (in kilogrammes). In the two years to the end of 2018, both fell by 35%, during which the number of branches powered by renewables rose by 32, to 69.
Its green pledge is a sprawling set of ambitions, ranging from an internal drive to reduce fuel consumption by more than 600 litres a day, to convincing staff to use more environmentally friendly forms of transport (such as walking).
It has joined up with the education ministry and the United Nations to create awareness among schoolchildren of the UN’s Sustainable Development Goals.
It also runs a host of other projects including biodiversity classes, a drive to make people aware of the importance of organ donation and financial literacy courses in schools in economically deprived areas.