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Best bank: Commercial Bank of Ceylon
Commercial Bank first opened its doors in 1920. In the course of a century, it has established itself as Sri Lanka’s best bank and its largest privately run lender, with 261 branches and 827 ATMs at the end of 2017. It is the first private lender to exceed SLRs1 trillion ($6.5 billion) in total assets.
None of its peers can compete with its scale or commercial clout.
It reported pre-tax profit of SLRs28 billion in 2017, up 18% from the previous year, which managing director Jegan Durairatnam attributes to having “all of the right ingredients in place”. Net interest income jumped 18.9% year on year to SLRs39 billion, with interest income up 27.6% to SLRs103 billion, thanks to a sharp expansion in the bank’s loan book. CommBank’s tier-1 capital ratio stood at 12.1% at the end of 2017, well above the baseline 8.5% target set by the Central Bank of Sri Lanka.
What makes the lender really stand out is its ability to see the whole picture. Respected by its peers, it excels on the domestic stage in corporate, retail and digital banking, as well as in its growing portfolio of CSR activities.
Durairatnam tells Asiamoney that Commercial Bank is focused on becoming a “reasonably big regional player”. In 2017, it secured a microfinance licence in Myanmar and saw its operations in the Maldives break even.
“We are looking to expand into Cambodia, Nepal and Bhutan, and even rural India, if we get the right acquisition,” Durairatnam says.
Best corporate and investment bank: NDB Investment Bank
Long term, this will be a keenly contested award. Local and foreign banks are competing hard to gain access to, or retain the loyalty of, the island’s leading corporates, while a sleepy local investment banking scene stands to benefit from Colombo International Financial City, a financial hub taking shape off the capital’s coast. But NDB Investment Bank, a division of National Development Bank, with SLRs110 billion ($710 million) in assets under management, is the clear winner in this category, and may remain so for years to come.
NDBIB, which had a stellar year in 2016, continued to perform in 2017 under chief executive Darshan Perera, completing 40 capital markets deals worth $360 million. It was joint financial adviser and manager to the SLRs960 million initial stock offering of RIL Property, and sole financial adviser to the IPO of Ooredoo Maldives, a division of the Qatari telecoms giant, which raised $27 million via the participation of 6,500 investors from the Maldives. This last deal marked the first time a Sri Lankan bank completed a stock listing unaided on foreign soil.
Notable M&A transactions include the SLRs1.3 billion sale of an 80% stake in Colombo Trust Finance to telecoms operator Dialog Axiata in September 2017, with NDBIB advising the buyer. A month later, it oversaw the sale of a 70% stake in fertilizer firm Unipower to CIC Holdings, for SLRs340 million. And it continued to rule the roost in the debt markets, acting as sole financial adviser to Lion Brewery Ceylon’s SLRs1.5 billion structured debt facility, as well as helping Sampath Bank to issue the country’s first Basel III-compliant debenture in a deal that raised SLRs6 billion.
Best digital bank: Hatton National Bank
Asiamoney met every big lender in Sri Lanka in February, and each one discussed at great length its digital banking credentials. Most Sri Lankan lenders now possess a pretty credible online banking platform, but Hatton National Bank garners not just the support of its clientele for its offering, but also the respect of its peers.
“The best at digital banking,” says a senior executive at a rival lender.
HNB’s success under chief executive Jonathan Alles lies in building up its expertise over time, adding layers as it goes. In an island where cash remains a large part of the economy, HNB has been notable in its ability to convince customers to use multi-functional ATMs rather than physical tellers: in 2017, 82.5% of withdrawals and 20% of deposits were processed via the bank’s cash machines.
To its online banking services, it has added a sophisticated mobile banking app. At the end of 2017, it had 85,000 electronic banking customers, up 85% from the previous year, with online banking volumes rising SLRs17 billion ($110 million) over the same period.
Next up in 2018: the opening of four digital bank branches, the rollout of a QR code payments system and, from June, a Hatton bank-badged mobile wallet.
Finally, there is the bank’s Smart Pay service, a near-field communication debit card that caters to schoolchildren, allowing them to pay for goods at permitted retail outlets, and providing parents and teachers with a full picture of where they shop, eat and drink.
Best for premium banking services: Commercial Bank of Ceylon
Demand for premium banking services is mounting in Sri Lanka, one of the emerging world’s fastest-growing economies. Most banks offer some sort of premium product, but no one does it better than Commercial Bank of Ceylon.
The journey for affluent customers starts with them depositing a minimum of SLRs7.5 billion (nearly $50,000) in a savings or fixed deposit account at the lender’s Elite Banking branch on Gregory’s Road in Colombo, a stone’s throw from the capital’s racecourse and cricket club. This grants them access to changing rooms, safe lockers and state-of-the-art meeting rooms. A dedicated relationship officer is on hand to discuss investment opportunities, while customers have access to special health-screening packages, an exclusive global health policy, home loans, leasing offers, a travel concierge, discounted banking charges and fees as well as help and advice on foreign currency transfers.
True, its premium-banking offering remains relatively small – as befits a nation still classified by index provider MSCI as a frontier market – but it’s growing fast. CommBank’s Elite Banking deposit base grew 23% year on year in the 12 months to the end of September 2017. The division has more than 1,000 customers; total deposits are SLRs12.8 billion and advances are more than SLRs680 million, according to bank data.
Best bank for SMEs: Hatton National Bank
Most banks in Sri Lanka see lending to small and medium-sized enterprises as vital to their future – and rightly so. But no one beats Hatton National Bank in terms of its exposure and commitment to the sector.
The bank reckons it serves in excess of 100,000 SMEs, ranging from mid-sized outfits down to one- or two-person micro enterprises, which collectively account for about a third of all outstanding loans.
Hatton describes itself as a pioneer in this field: it disbursed SLRs137 billion ($884 million) to smaller firms in 2017, and has 10 SME-dedicated centres dotted around the country, with more set to open this year. It works hard to add new layers of service, recently introducing distributor financing and rolling out export lending products in alliance with the Export Development Board.
It is tying up agreements with multilaterals and national-level lending institutions, including Germany’s GIZ, that will let the bank lend at low rates of interest to smaller companies.
The bank’s digital prowess is also a key factor here, with Hatton partnering in 2017 with Webxpay, a Colombo e-commerce provider, to assist SMEs in their transition to the digital economy and cashless transactions.
Rajive Dissanayake, chief strategy officer at HNB, tells Asiamoney the bank is permanently committed to the cause.
“What excites us is SME lending,” he says. “This country is reaching upper middle-income status, and there is huge scope for growing companies to take a bigger role in the local and the regional economy. We definitely want to be part of this story.”
Best international bank: HSBC
Three foreign lenders stand out on this teardrop-shaped island: HSBC, Standard Chartered and Citi. The latter two have solid and long-standing onshore operations, but neither can compete with the strength of HSBC, which first opened its doors in Sri Lanka way back in 1892.
The British lender is not as omnipresent as it is in, say, the UK or Hong Kong. Rather, it tends to cherry-pick where and in which sectors to specialize and dominate. So it focuses on large local corporates and global multinationals doing business here, on high-end retail via its HSBC Premier service, and on its credit card business, where it is market leader with a 25% market share in card receivables and spend.
Behind the scenes, HSBC, led by country chief executive Mark Prothero, is also an important financial institution. It is the only bank to partner with the Sri Lankan government on every one of its 11 post-2007 sovereign bond sales – a list that includes a $1.5 billion 10-year print, completed in May 2017, which involved HSBC acting as joint lead manager, bookrunner and ratings adviser.
It is also a large provider of funding to key infrastructure projects, including those plugged into China’s Belt and Road Initiative. A notable transaction was the $44 million expansion of Bandaranaike International Airport, with HSBC acting as sole arranger, agent and security agent on a deal that aims to double the airport’s handling capacity in five years.
Best bank for CSR: Commercial Bank of Ceylon
Some banks see corporate and social responsibility as an afterthought. Commercial Bank of Ceylon is genuinely committed to the concept, having set up a trust back in 2004 that generates measurable and sustainable social dividends for those parts of society that need it most.
At the heart of its CSR activities is education and information technology. To date, Commercial Bank has donated 175 IT laboratories to schools around the island, rolling out online learning programmes that help children improve their digital literacy and a learning management system that enhances teachers’ classroom skills.
In rural areas, the lender has joined forces with scientists to combat a chronic kidney disease that results from drinking contaminated water; CommBank is helping to distribute clean water to more than 1,500 families. Another landmark project points to the bank’s commitment to cultural and environmental heritage. It is funding a book on Sri Lanka’s biodiversity, published in alliance with the Biodiversity and Elephant Conservation Trust, a non-profit founded in 1998. CommBank’s trust has also committed SLRs5 million to the construction of a new museum at Kiri Vehera, an ancient Buddhist stupa in the south of the island that dates back to the sixth century BCE.
By the end of 2017, the trust had completed 307 projects at a total cost of SLRs405 million ($2.6 million).