Unperturbed by the present downturn in the economy, which is seen as temporary, Commercial Bank is confident its adherence to the fundamentals of good banking will help it bounce back with renewed vigor when the economy recovers. Talking to Echelon magazine, Tamara Bernard – Assistant General Manager Corporate & Investment Banking, Commercial Bank of Ceylon PLC discusses how the bank has navigated the challenges of the economic slowdown, staying resilient and focused.
Banks play a significant role in a country’s economic growth. Yet risks associated with an economic slowdown are also high. How does Commercial Bank mitigate these risks?
Tamara: Banks play the role of financial intermediaries in an economy. Therefore, the activities and expectations of the economy are co-related to the performance of the sector. In the present scenario both domestic and global factors are under stress which is reflected in multiple facets of business and economy. Banks are closely interwoven with the performance of the economy and the present situation is no exception.
[pullquote]OUR CLOSENESS TO THE CORE PRINCIPLES OF LENDING WILL HELP US WITHSTAND THE SITUATION. THIS IS AN OPPORTUNITY TO INTRODUCE CORRECTIVE ACTION OR EVEN CHANGE COURSE WHERE NEEDED.[/pullquote]
Commercial Bank has robust systems and procedures which have been tried and tested over decades and at different business cycles. Preparedness in both good and trying times supported by systems, procedures and moreover the capacity of staff will determine the final outcome. While acknowledging that no activity is spared of risks, we practice portfolio diversification and preparedness as part of our lending culture. We remain flexible to changes and strive to adopt a proactive approach, while being in constant dialog with our customers. The present challenging times are a Litmus test of our lending quality and our closeness to the core principles of lending will help us withstand the situation. This is an opportunity to introduce corrective action or even change course where needed.
What has been the contribution from corporate banking towards growth in topline?
Tamara: The bank’s Centre-Based Corporate Banking portfolio consists of 40% of its local operation, while the corporate portfolio handled by the bank’s Personal Banking Unit made of corporates grown within the Branch Network is approximately an additional 10%. We maintain long standing relationships with most of our corporate clients, offering them tailor made products and services, while being in continuous dialog and engagement with them. We consider our corporate clients a valuable asset contributing significantly to fee-based income, volume and to our top line.
What is Commercial Bank’s strategy to support entrepreneurship?
Tamara: In a developing economy entrepreneurship plays the role of a catalyst fast tracking the growth process. The bank needs to understand the drive and financial needs of entrepreneurs and customize the conventional banking package to meet their requirements, while keeping to the boundaries permissible and prudently adopted by the industry. When the match between the two is met and the entrepreneur receives the financial freedom to execute his or her business needs, the equation facilitates the perfect partnership.
Often, an entrepreneur’s business operation is informal compared to a corporate. The bank therefore needs to identify, assist and provide guidance. To do this the banker is required to be the “Jack of all trades” understanding the business and market of the entrepreneur. This requires interest and commitment to support as well as the capacity to say “No”, where it’s warranted and exceeds the bank’s premise of risk appetite. We have partnered entrepreneurs on their journey and witnessed small businesses grow into small and medium enterprises (SMEs), SME’s grow into corporate and corporate maturing into market leaders. At Commercial Bank we strive to live up to our commitment to all our stakeholders in the best and most productive manner.
[pullquote]THE COMMERCIAL BANK’S INVESTMENT BANKING OUTFIT COMPLEMENTS THE CORPORATE BANKING ACTIVITIES OF THE BANK THROUGH ITS CONTRIBUTION OF ADVISORY AND FUND RAISING CAPACITY TO ENHANCE OUR SERVICE OFFERING TO CUSTOMERS.[/pullquote]
How about the investment banking portfolio?
Tamara: Commercial Bank’s Investment Banking outfit complements the corporate banking activities, through its contribution of advisory and fund raising capacity to enhance service offerings to customers. The Investment Banking Unit is specialized in structuring and managing Initial Public Offerings (IPOs) and private placements of equity and debt issuances. The unit also has the ability to execute syndicated lending assignments, while also being able to advise on Mergers and Acquisitions and corporate restructuring exercises.
The main benefit of the Investment Banking services that are offered to corporate customers relates to the ability of our customers to obtain an integrated suite of services from the bank, ranging from loans to the raising of equity for their businesses. The ability of the bank to provide these services in an integrated manner establishes the capacity for the bank to function as a universal bank. As the Sri Lankan economy continues to grow, we are of the view that demand for investment banking services will increase, and our Investment Banking Unit is positioned to cater to this demand.
Tell us about the facilities Commercial Bank offers its corporate clientele?
Tamara: Be it working capital financing, trade financing, capital expenditure financing, infrastructure financing, project financing, syndication or offshore lending; we have expertise in all areas. What we do differently is that we package the facilities and customize it to meet the individual customer’s business needs. This may require us to offer packages of hybrid facilities and terms. Our objective is to give corporate clients the freedom and confidence to engage in their business, while we take care of facilitating their banking requirements. Our capacity to be pro-active in our offerings and willingness to walk the distance with our clients supplements our wide range of product offerings.
Has the recent downturn impacted the bank’s performance and how has Commercial Bank faced up to it?
Tamara: The present business climate has impacted the entire banking sector. However, the challenges have given us the opportunity to further understand vulnerabilities and instill corrective measures. Our strategies and policies have made it possible to be proactive in our outlook and therefore, we are not perturbed by the temporary downturn. Our size, strength, high level of compliance, competent staff and strong clientele make it possible for us to ride through a lean period. We remain hopeful that the situation will bounce back and we will be in a strong position to reap the benefits to come in the next stage of the cycle.
However, the recent socio-political and economic factors which curtailed growth along with the changes introduced in the accounting standards have made a negative impact on the performance indicators of the bank. Although these are trying times, the challenges are directing the banking industry to a different level of maturity where staying close to fundamentals becomes the strength and power of resilience.