Key Performance Indicators |
Actual 2012 Rs. Mn. |
Budget 2012 Rs. Mn. |
Actual 2011 Rs. Mn. |
Achievement (Actual over Budget) (%) |
Deposits as at December 31 | 301,251.4 | 303,460.7 | 253,179.3 | 99.3 |
Advances as at December 31 (Gross) | 191,498.5 | 213,678.8 | 168,763.3 | 89.6 |
Profit before Tax | 6,996.4 | 6,494.0 | 4,506.4 | 107.7 |
Cost Income Ratio (%) | 47.0 | 54.6 | 51.4 | - |
NPA Ratio (%) as at December 31, | 5.5 | 4.7 | 5.1 | - |
Personal Banking division of the Bank made an excellent contribution to the overall performance of the Bank. The division recorded an impressive growth in profits compared to the last year which is well above the budgeted profits set at the beginning of the year. Profitability ratios were also well above the levels set in the Budget. However, the division fell short of the budgeted loans and advances mainly due to increase in average interest rates as well as the controlled credit environment prevailed in the country.
The Personal Banking Division has the pivotal responsibility of successfully operating the Bank's island-wide network of delivery points. In the process, the Division meets the needs of individual customers as well as Small and Medium Enterprises (SMEs) across Sri Lanka.
The traditional brick and mortar branches still play a dominant role in the Sri Lankan banking industry. The Bank invested substantially to improve the physical infrastructure of its network over the past several years. In tandem with its aggressive promotion of customers to migrate to more technologically advanced channels, the Bank has kept expanding its network of delivery points to reach a wider customer base in different geographical locations. This widest of footprint coupled with the Bank's inherent strengths allows Commercial Bank to be truly considered as a national bank in every sense of the term. In 2012, the Bank added 14 delivery points which are in the form of 6 branches, 5 CSPs, 3 SPs. With this, the Bank provides its services via 227 delivery points as at end of the year.
The island-wide network of delivery channels is organised into 12 administrative regions, each with an officer responsible for decentralised decision making with regard to credit transactions and everyday branch operations.
The Division also manages the performance of 365-day banking, Holiday banking, Saturday banking and Priority banking. The Bank operates its 'Elite' branch in Colombo 7 to serve high net worth customers in addition to the priority banking customers currently on our books, who enjoy certain privileges throughout the branch network. The Bank operates 63 Holiday banking centres covering most of the provinces in the country.
The operations of the Card Centre, which issues 'CAT' ATM cards and credit/debit cards under franchises from MasterCard International and Visa and the e-Banking division which oversees the entire spectrum of electronic banking services of the Bank also come under the purview of Personal Banking.
Please refer our delivery channels.
The presence of a well spread branch network backed by solid financial stability help the Bank in its deposit mobilisation efforts. The increase of foreign remittances through our branch network, a bearish stock market and the prevailing lack of alternative, reliable investment opportunities in the market too contributed to the growth of deposits during the year.
Upward movement in interest rates compared to the previous year is in line with the increase in policy rates and tight monetary conditions. As a result, interest rates applicable to both lending and deposit recorded an increase during the year. The Bank had re-priced interest rates on its deposits on several occasions during the year under review, to remain competitive in the market. This trend continued until CBSL intervened to reduce policy rates in December 2012.
Amidst this challenging environment, the Bank was able to record a 20.6% growth in its deposits base compared to 22.8% recorded last year.
In a high interest scenario, the Bank witnessed a substantial shift from low cost to high cost deposits. As a result, the CASA ratio deteriorated to 44.5% as at the end of 2012 from 51.6% at the end of 2011.
The Bank introduced the 'Anagi' savings deposits account exclusively for women which recorded an impressive growth since its launch in August 2012. 'Spin Dot Com Junior Saver Account' and 'Dot Com Teen Saver Account' were merged into a new account named 'Dot Com Youth Savings Account' in 2012.
However, the interest rates applicable on foreign currency denominated deposits remained competitive and broadly stable, reflecting the continuing low interest rate environment in major economies.
Our ATM network acts as a catalyst in mobilising deposits. Further, it gives the Bank a distinct edge in a highly competitive retail banking environment, being the single largest ATM network operated by a bank. Our ATM network supported in promoting the channel migration while significantly reducing the counter traffic experienced at branches.
During the year, the network was expanded by 55 new ATMs. Its cumulative strength stands at 555 ATMs as at the end of 2012. At present, the Bank operates 123 off-site ATMs including 13 ATMs in Railway stations; we are the only private commercial bank to establish our presence at such public locations. Testifying to our healthy rate of expansion, we have installed 54 ATMs on average per year, during the last 5 years.
Continuing the trend maintained in previous years, the uptime of our ATM network was over 99% during the year. The Bank improved the visibility of all ATMs with new, eye catching signage.
2012 | 2011 | Growth | |
Number of ATMs as at end December | 555 | 500 | 11% |
Value of cash dispensed during the year (Rs. Bn.) | 250 | 205 | 22% |
Total No. transactions during the year (Mn.) | 58 | 50 | 16% |
Daily average value of cash dispensed during the year (Rs. Mn.) | 682 | 561 | 22% |
Daily average No. of transactions during the year | 157,755 | 137,837 | 14% |
The majority of Sri Lanka's domestic banks was engaged in the pawning business during 2012. In addition, several non-banking financial institutions and a few companies specialised in this trade were also active in the field and have expanded their delivery points during the year resulting in increased competition in the industry.
10 pawning units were launched and our services are now available in 184 locations. A core-banking system based, new pawning sub-system was introduced in order to further reduce the customer turnaround time and to provide a proper MIS to facilitate pawning related decision making. Further, from a security standpoint, this system is able to track Blacklisted and Non-performing customers.
The global gold prices dropped significantly until the third quarter of the year mainly due to the lingering effects of the economic crisis which affected the West. This same scenario impacted the local gold market as well. Spot gold prices dropped to a historical low in the middle of the year and picked up towards the latter part of the year.
Commercial Bank adopted a more conservative approach and the amount advanced was constantly monitored against the market value of gold to mitigate risks. The interest charged also was increased from 13% to 19% during the year. This resulted in a low portfolio growth that persisted throughout the year.
In terms of performance, the Bank has recorded a negative growth of Rs. 1,040.6 Mn. during 2012 which is a 8.9% decrease compared to the portfolio of Rs. 11.651 Mn. as at December 31, 2011. The Bank's NPA ratio for pawning is 3.2%.
Our key areas of strength continued to be the Bank's extensive branch network which reaches across the island and the relatively low cost of funds. Further. The Bank entered into strategic tie ups with many reputed vehicle dealers during the year.
2012 | 2011 | |
Outstanding as at December 31 (Rs. Bn.) | 24.6 | 20.8 |
No. of new leases facilities granted | 4,226 | 6,121 |
Value of new leases (Rs. Bn.) | 11.8 | 15.4 |
Despite the deterioration of the credit quality in the banking industry, the Bank recorded a healthy NPA ratio of 2.6% in leasing.
The Bank continuously assisted the public at large through its unique personal loans scheme in a reduced disposable income environment due to increased rate of interest and living expenses. The existing high net worth customer base is the main strength in Personal Loan product and the Bank has promoted the 'Top-Up' facility with a greater emphasis in order to maintain the high quality of the personal loan portfolio. Further, the minimum salary requirement was increased during the year in order to ensure the well-being of borrowers after loan repayments. However, this was revised back to the original requirement by the end of the year.
During the year, we focused our attention on centralising the loan origination process with a view to making it quicker and more efficient, and also to identify professionals for loans. This process resulted in increasing the credit quality of the personal loan portfolio and reducing the turnaround time of customers.
In terms of performance, capital outstanding as at year end reached Rs. 17.2 Bn. whilst the number of new loans granted during the year recorded 11,510 which amounted to Rs. 5.4 Bn. in value. Despite the increasing trend in non-performing advances, the NPA ratio of personal loans portfolio amounted to a healthy 3.9%.
Domestic factoring statistics show an all round excellent performance despite the upward pressure on interest rates and the credit ceiling on commercial banks during the year.
The Bank's domestic factoring business grew by 77% in 2012; in absolute terms, Rs. 5.2 Bn. The value of invoices factored reached Rs. 12.1 Bn. and the portfolio as at end December 2012 stood at Rs. 1.6 Bn. The total number of invoices factored during the period under review numbered 88,642 whilst the number of active debtors stood at 1,954.
The Banks' extensive branch network and the comparatively low cost of funds were our biggest strengths over the period.
Despite the CBSL introduced maximum interest rate of 16% on housing loans portfolio of Commercial Bank grew a healthy rate of 15% during the year.
During the recent past, apart from construction by individuals, developers are playing a major role in constructing condominiums and apartments to meet the housing demands of Sri Lanka's affluent. Their existence and strategic tie-ups have paved the way for Commercial Bank to extend sizeable home loan facilities and in turn generate significant returns.
Some measures that lent strength to this business segment were - the availability of Foreign Currency Home Loans for Sri Lankans working overseas; the competitive interest rates offered within different Home Loan products which satisfied the needs of different customer segments; the introduction of a discount scheme in collaboration with building material suppliers and the Bank's initiatives to pursue strategic tie-ups with renowned property developers to promote apartments as a housing solution.
Factors contributing to further growth are the technological enhancement of our Home Loans Unit; the conduct of various promotions and product marketing initiatives; extension of a Privilege Home Loan Scheme designed to appeal to professionals and academics.
However, the developing trend of upward movement in interest rates, if not arrested, may hinder future growth in this segment.
Annual growth of Home Loan portfolio
Year | 2012 | 2011 |
Portfolio (Rs. Bn.) | 25.0 | 21.8 |
Growth Ratio (%) | 15.0% | 20.0% |
A fair increase in transaction volumes of Credit and Debit cards has been observed during 2012. In this respect, credit cards grew by around 23% while debit cards grew by a much higher rate of 46%.
Commercial Bank offers a wide range of card products both Debit and Credit to cater to the different segments of its large customer base. Both Credit and Debit cards have differentiated products ranging from Classic to Platinum categories.
Having the largest Debit card base in Sri Lanka, the Bank recorded an impressive 50% growth in purchase volumes resulting in an increase in the market share and commission income for the year under review. On Credit Cards the volumes grew at a healthy rate of 29% which again is better than the market growth rates.
During the year, the Bank commenced issuing 'Platinum' debit cards to cater to high end customer segment. Further, Bank's ATM network was connected to the China Union Pay ATM network enabling the largest card issuer in the world to access their accounts through the Bank's ATMs.
The Bank primarily concentrated on mass promotions targeting their large customer base comprising of both debit and credit cardholders. Discounts were offered at hotels, restaurants, hospitals and clothing stores throughout the year, especially during holiday/shopping seasons.
During 2012, card industry in Sri Lanka experienced an upward pressure on card frauds comprising both counterfeit and internet frauds.
The Bank implemented a 3D Secure authentication system for its entire card base to counter the increasing Internet fraud trend during 2012. This additional authentication layer runs on top of the Internet transactions and authenticates the genuine cardholder prior to completing the order. Commercial Bank uses the dynamic card authentication method where a One Time Password (OTP) is sent to the cardholder's mobile phone for each and every transaction that enables the cardholder to engage in e-commerce on a much more secure platform.
As at end of the year 2012, around 75% of Commercial Bank's active card base was converted to chip based cards to prevent counterfeit fraud. The best available technology to prevent counterfeit fraud is the use of chip technology which has been deployed by the Bank.
Bank introduced SMS alters on both Debit and Credit cards. This is an additional security feature that informs the cardholder about card transactions soon after their occurrence.
With the introduction of the 3D Secure authentication system to prevent Internet fraud, the Bank opened up its Debit card base for Internet transactions which has a huge potential for growth in view of the ever-increasing Internet community in Sri Lanka.
The Card Centre has upgraded the Call Centre system to provide better service to its cardholders and has implemented skill based routing when assigning calls to agents to enhance service quality whilst enabling Tamil as a language preference. Further, the Bank commenced sending e-statements for credit cardholders during the year.
With the introduction of the 'Anagi' Savings account, a chip enabled debit card has been launched with unique features for accountholders.
A key milestone this year was the introduction of a new Internet banking platform for the personal users. The new platform written for the Microsoft .NET Framework offers exceptionally user-friendly menus and cutting-edge safety and encryption features. The new e-Banking platform enables users to do more, and requires less intervention by the Bank. It embodies various enhanced safety features including two factor authentication for payments and third party fund transfers, two-layer login, a virtual keypad to protect against capture of data on key strokes, customisable security questions, password change alerts and third party fund transfer alerts to mobile phones and password verification via the latest Hardware Security Module (HSM).
Self-registration, a customisable 'My Profile' feature that can accommodate an image of the user's choice, self-addition and registration of payment recipients, customisable templates for payments, multiple payments via a single basket, a Quick Navigation menu that reduces key strokes and customisable viewing of transaction histories are among the new features of the system.
Key indices in this business area reflect growth in 2012. Our customer base grew 31% whilst income grew by 24%.
Product | Customer Base Growth % | Income Growth % |
Online Banking | 31.14 | 24.40 |
M-Banking | 7.04 | (7.54) |
Product | Transactions Growth % | Volume Growth % |
Online Banking | 39.83 | 57.36 |
Commercial Bank was recognised as the "Bank with the Highest Growth" in the 'High Volume Bank Category' among the banks using Sri Lanka Inter-Bank Payment System (SLIPS) in 2011/12.
Account holders of the Bank now have access to banking facilities even while they are on the move, following the launch of a dedicated WAP portal by the Bank to facilitate access to a wider segment of mobile phone users.
With the introduction of the new version of Online Banking, a series of direct promotional campaigns were organised which were successful in introducing the new online banking platform to a larger number of customers.
ComBank PayMaster is an online total payment solution. It is relatively problem free and allows large corporate clients to execute multiple payments through a single mechanism. Many value additions were made during the recent past such as enabling clients to upload their ETF/EPF contributions, surcharges and bulk utility payments, among others.
The chart below bears testimony to the growth achieved in this segment.
Product | Customer Base Growth % | Income Growth % |
ComBank PayMaster | 11.04 | 26.97 |
Product | Transactions Growth % | Volume Growth % |
ComBank PayMaster | 8.65 | 24.75 |
The Bank's promotion of the 'PayMaster Package' particularly within the country's industrial zones has borne very positive results.
The total operation at eBanking with regard to PayMaster processing was upgraded to eliminate all paper based applications, thus generating significant cost savings. This product enhancement has also helped ease the workload at our branches by eliminating the need for a manual approval process, which had been required for payment authorisation.
Automation of the internal SLIPS handling procedure has also assisted in reducing the manual workload at the processing unit which in turn reduced the operational cost drastically.
The Bank is working with seven leading insurance companies and Commercial Insurance Brokers (Pvt.) Ltd. to provide life and general insurance solutions. We have positioned 67 Business Promotion Officers from two leading insurance companies at our branches across the island to canvass life insurance business amongst our customers. Likewise, 12 officers from Commercial Insurance Brokers are also located at our branches to assist in general insurance needs of our branch network.
The market penetration for insurance is low when compared to other countries in the South Asian region. The year, under review was very challenging for canvassing life policies due to intense competition in the market. Dwindling disposable income of the people also adversely affected the life insurance sector. Further, the general insurance industry was also affected due to reduced growth in lending as a result of the increased interest rate regime that prevailed in the country.
The Bank inked agreements with four insurance companies in 2012. In terms of improving operational efficiency, we introduced a special Bancassurance page on our intranet and successfully gained access to the On Line Marine Policy portal of a leading insurance company.
The Bank recorded a satisfactory 38% growth in fee income from this new line of business during a relatively short period of operation in 2012. Also, Bancassurance promotions carried out jointly with leading insurance companies during the year augmented the growth of the business.
Commercial Bank is the pioneer in providing banking facilities within the country's supermarket system. Currently, we operate 35 outlets across the country. Apart from the obvious benefit of convenience to the Commercial Bank customer, we are finding many other customers patronising these outlets which, reflecting the supermarket service ethics, are open outside normal banking hours.
Customer turnover has been on an increasing trend from the inception of this delivery channel.
Supermarket banking has brought the Bank out of the traditional office into a more public domain, thus increasing visibility and accessibility and fostering even more personal contact between Bank and customer.
Such has been the popularity and demand experienced at these outlets, that many are now faced with space constraints. This has compelled us to limit the operational functions that could be handled at these points. During the year, 18 outlets which were located in a leading super market chain were relocated to stand alone centres and other super markets.
The Bank has enhanced the limits of a selected few outlets and increased staff numbers to better serve the customer. Further, operations handled by these outlets increased considerably as represented by volume increase in deposits, number of accounts and daily transaction vouchers posted by the outlets.
The Bank added four new service points during the year.
Commercial Bank Elite, our priority banking arm is an exclusive banking experience for high net worth customers. Emphasis is given to high quality, personalised customer service and convenience in every aspect of its operations.
Commercial Bank Elite has its own premium premises at No. 7, Gregory's Road, Colombo 07. The range of benefits offered includes exclusive accessibility to conduct financial transactions within its secure premises. Further, they are eligible for a host of discounts offered by reputed service providers. Dedicated relationship officers attend to all financial needs of the Elite customer.
In addition, the Bank operates two other priority centres within our branches at Reid Avenue, Colombo and in Kandy for the benefit of the customers in the 'priority circle'.
Credit schemes such as Micro Finance, Paddy/Stock Purchasing Loan scheme, Tea Development Loan Scheme and Agriculture Credit Scheme are funded by the Bank's own funds. These helped the Bank to increase its lending towards the agriculture and micro enterprise sectors.
In addition, the Bank participated in five refinance credit schemes and two interest subsidised credit schemes, both focussed on the agriculture sector.
This segment continued to grow and remain profitable as the chart below indicates:
Three more Agriculture and Micro Finance units were added to the network of dedicated centres which are established to cater to Agriculture and Micro Finance sectors, increasing the total number to nine units. The growth in agriculture lending and micro financing was due to many reasons, some of which are;
During the year under review, three credit lines were in operation - the 'SAUBAGYA' Loan Scheme, which was refinanced by the CBSL, 'SMILE II' - a revolving scheme refinanced by the Japan Bank for International Co-operation (JBIC) and the 'DIRIBALA' Loan Scheme, which is Commercial Bank's own development lending product.
The 'DIRIBALA' Loan Scheme is a unique product of the Bank targeting SMEs where medium term repayment and flexible terms are available to them to facilitate repayment of loans.
Several programmes were conducted to promote these loan schemes including a series of programmes to improve financial literacy amongst SMEs, Micro enterprises, entrepreneurship development programmes for SMEs and several promotional campaigns to raise general awareness on development lending opportunities provided by the Bank.
As at end 2012, the value of this loan portfolio was Rs. 18.09 Bn. It grew by 12.7% over the year and in absolute terms, the growth amounted to Rs. 2.0 Bn. New loans granted during 2012 totalled to 735 with a face value of Rs. 6.7 Bn. The increase in market interest rates served as a demotivating factor for borrowers.
Portfolio information as at December 31, 2012.
The following is a snap shot of initiatives undertaken by the Personal Banking aligned with the main strategic imperatives of the division.
Strategy | Extent of Implementation | Desired Goals |
Maintain No. 1 position in deposits among private commercial banks |
|
|
Expand delivery points and channels to become the most sought after network in the banking industry |
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|
Enhance contribution to Bank's advances portfolio |
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Maintain the NPA ratio below industry norms |
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Build a knowledgeable personal banking team |
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|
Key Performance Indicators | Actual 2012 Rs. Mn. |
Budget
2012 Rs. Mn. |
Actual 2011 Rs. Mn. |
Achievement (Actual over Budget) (%) |
Advances as at December 31 (Gross) | 109,664.2 | 115,237.6 | 91,976.5 | 95.2 |
Profit before Tax | 4,192.5 | 4,366.1 | 3,435.3 | 96.0 |
Import Turnover | 177,894.0 | 146,440.1 | 175,500.3 | 121.5 |
Export Turnover | 225,396.5 | 209,857.0 | 184,158.2 | 107.4 |
Cost Income Ratio (%) | 20.1 | 21.3 | 20.8 | |
NPA Ratio (%) as at December 31 | 1.2 | 1.6 | 2.7 |
* Based on SLAS
The growth of advances portfolio of the Corporate Banking division was adversely affected due to the increase in overall interest rates together with the controlled credit environment prevailed in the country during the year. Nevertheless, the division recorded impressive growths in advances and profits when compared to the previous year. Trade finance volumes also recorded improvements over the last year as well the actual levels were also above the Budget. Quality of the lending portfolio was well represented by the NPA ratio of the division.
The Corporate Banking Unit comprises of the Bank's Foreign Branch, Off-shore Banking Centre, Islamic Banking Unit and the Corporate Finance Unit. It offers its customers a wide range of services including working capital financing, trade finance services, leasing and factoring facilities, project financing and related services as well as Islamic Banking products.
The Foreign Branch has over the years achieved a reputation for expertise in Trade Finance operations and caters to a clientele in diverse fields of business activity. Its customers are medium sized and large Sri Lankan corporate businesses, blue chip companies and multi nationals operating in Sri Lanka.
The Corporate Banking division overlooks the Bank's credit operations in Bangladesh and continues to conduct selective lending in the Maldives.
The Trade Finance magazine published by the Euro money selected Commercial Bank as the Best Trade Bank in Sri Lanka in 2012, this was the second consecutive year the Bank achieved this prestigious accolade, reflecting its pre-eminent position in the trade finance service industry in Sri Lanka.
The Bank has a well established and trusted network of correspondents, covering every part of the world. This long standing relationship has provided a distinct advantage to the customers of the Bank in conducting their international business with global counterparts.
The post-war development activities in the country, mega infrastructure projects commenced by the Government and the boom in the tourism sector continue apace. The Investment Fund Account (IFA), built upon the tax savings announced by the Government Budget has been mainly utilised by the Corporate Banking division to support the Government's initiative to develop the road network. Funds have been earmarked to finance another road development project.
Higher policy rates, credit ceiling and lower levels of liquidity led to higher market interest rates during the year 2012. The Benchmark Average Weighted Prime Lending Rate (AWPLR) which was at 10.41% in January increased to 14.40% by the end of December. Notwithstanding the increased interest rate scenario in the country, the Corporate Banking division maintained a non-performing loan ratio of 1.2% as at the end of 2012, reflecting the high quality of its loan book.
A largely conducive environment prevailed during 2012, in respect of export business. Tea production fetched attractive prices during the year which offset the drop in production due to adverse weather conditions that prevailed for a major part of the year. However, the external conditions especially for tea exports were undermined by stringent sanctions imposed by the UN, US and EU on some of our traditional markets, which led to this export business taking a gradual shift to other countries, this will not augur well in the long run.
There was a good international demand for natural rubber, which is a high value added traditional export item. Spices also commanded a good demand throughout the year which led to enhanced production. Similarly, coconut related products (activated carbon/fibre/coir pith) also attracted high international demand during the year.
The unstable Rupee caused financial losses/reduced profits to exporters, this situation was exacerbated during the last quarter of 2012.
It is pertinent to mention that the Bank recorded a growth of 7% in its export volumes while the country recorded a drop during the year. Further, the Bank experienced a growth in all major export items such as Tea, Garments and Rubber during the year. The export turnover figures recorded for the past two years were as follows:
2011 - US $ 1,615.0 Mn.
2012 - US $ 1,728.0 Mn.
This growth was achieved despite the crisis situation in the Middle East, which affected tea exports and the volatility of exchange rates which resulting in certain exporters remaining hesitant to enter into export contracts.
In 2011, of the total import turnover, 51% or US $ 802 Mn. related to vehicle imports. However, with the upward revision of import duty in early 2012, the import turnover of vehicles declined to 9 % or US $ 121 Mn. in 2012. This impacted on the Bank's import turnover which declined by 13% in 2012 compared to the volumes recorded in the previous year. Furthermore, the import turnover of the country and the Bank were adversely affected due to the depreciation of the Rupee during the year.
Import turnover figures recorded for the past two years were as follows:
2011 - US $ 1,572.1 Mn.
2012 - US $ 1,372.7 Mn.
Discounting the vehicle import turnover, the Bank's import volumes recorded a substantial growth compared to the previous year.
Despite the challenging environment arising out of economic crisis affecting the global markets as well as adverse impact on local fiscal policy decisions, the industry observed a favourable change in regulatory measures under the Import Control Act which permitted and issued specific guidelines in handling shipments under Open Account Payment terms.
Modifications were made to improve the processing speed of the Eximbills, Trade Finance software used by the Bank, during the year.
The operating environment in 2012 was marked by difficult economic conditions, such as relatively high interest rates, a currency which depreciated significantly, as well as tight credit conditions. Further, due to adjustments in response to significant overheating in the market in preceding years, the stock market experienced a steep downward correction before recovering to some extent in the latter part of the year.
Margin trading operations, which were launched in 2010 as a key capital markets product of the Bank, were subdued in 2012 due to adverse market conditions.
Similarly, the two equity funds established in 2010 were affected by the adverse market conditions. The long-term orientation of one fund enables the Bank to benefit from expected long-run price improvements in listed equities. The other fund which employs a short-term trading strategy is poised to benefit from short-term price adjustments in listed equities by means of relatively frequent trading.
Other capital market activities of the Bank such as equity and debt structuring were also affected due to the unfavourable market conditions. Demand for large scale project finance was subdued due to the relatively high interest rates which prevailed during the year.
The Commercial Bank's Islamic Banking window designated 'Al Adalah' has been in operation since June 2011.
In addition to the Central Bank's supervisory role, Al Adalah also needs a Sharia Supervisory Board or council to ensure that all transactions conform to the parameters of the Sharia. The Bank continued to retain the three eminent Sharia scholars appointed to this Board at the inception and periodic meetings and audits were carried out.
Some of the highlights of the year are given below:
From an infrastructural perspective, this Islamic window operates from Colombo as its funds require to be exclusive of conventional funds, hence they are vested with the unit in Colombo.
In April 2012 a separate desk to handle Islamic banking in the Eastern region was set up and this is presently located at the Akkaraipattu branch.
A new product, Musawamah was introduced in 2012. The IBU also commenced the provision of Bank Guarantees and the routing of Letters of Credit for IB customers.
The IBU's IT process was developed internally on the existing computer system. Continuous updating is being carried out. The IBU started distributing profits quarterly from the beginning of 2012, where as in 2011 this was done half yearly.
Substantial growth was recorded in all key areas of the unit during the year. Annual gross income and net profit of the IBU for the year amounted to Rs. 104.7 Mn. and Rs. 27.9 Mn. respectively.
Market conditions and exchange rate fluctuations adversely affected Bullion Trading during the year. However as per the statistics of the Sri Lanka Customs, the Bank continued to maintain the leadership in bullion trading business in the country during the year. The reputation attached to the supplier of gold also helped in achieving a sustainable growth in the business volumes of the bullion trading centre. The host of benefits offered by the centre inter alia include online gold trading facility, night time gold fixing facility, special pawning facility and custodial service facility.
The following is a snapshot of initiatives undertaken by the Corporate Banking aligned with the main strategic imperatives of the division.
Strategy | Extent of Achievement in 2012 | Desired Goals |
Ambitious growth in the lending portfolio whilst maintaining the quality |
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Revisit and redefine customer convenience and satisfaction in all areas |
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Maintain the most preferred Trade Finance Bank position |
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|
Enhance contribution from the Corporate Finance Unit |
|
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Enhance the contribution from other units |
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|
Key Performance Indicators |
Actual 2012 Rs. Mn. |
Budget 2012 Rs. Mn. |
Actual 2011 Rs. Mn. |
Achievement (Actual over Budget) (%) |
Interest Income | 9,304.0 | 9,412.9 | 8,635.2 | 98.8 |
Foreign Exchange Profit | 2,856.1 | 1,551.2 | 1,364.1 | 184.1 |
Profit before Tax | 1,490.0 | 876.4 | 1,636.0 | 170.0 |
Interest Earning Assets as at December 31 | 119,086.0 | 133,238.3 | 113,596.4 | 89.4 |
Cost Income Ratio (%) | 28.2 | 28.4 | 24.8 | |
* Based on SLAS |
Treasury achieved most of the key performance targets set in the Budget at the beginning of the year. Foreign exchange profits recorded well above the Budget mainly due to higher gains on forward/spot exchange during the year. Further, depreciation of the rupee also had a favourable impact to the foreign exchange profit of Treasury operations.
The Bank's Treasury is a distinct profit centre headed by the Head of Global Treasury and the Head of Global Markets, who report to the Managing Director of the Bank. The operations are segregated under Forex and Corporate Sales, Fixed Income Securities and ALM operations, each headed by a chief dealer.
The Treasury is entrusted with managing the interest rate risk, liquidity risk and the foreign exchange risk of the Bank. It carries out the inter-bank operations for managing risks and also has an integral role to play in the Bank's proprietary trading business. In addition, ALM function is also put into operation by the Treasury. Further, it supports the retail and corporate banking areas on their funding requirements and manages the FCY flows arising out of their business.
In addition, the Treasury directs the Bank's asset and liability management process by providing ALCO with interest and exchange rate updates as well as data on other macroeconomic developments. Based on the inputs, the ALCO sets parameters for the management of maturity mismatch risks in the Balance Sheet. It also gives directions to the ALCO Sub committee in fixing fund transfer pricing based on the prevailing market conditions.
2012 in many ways was a year of challenge and opportunity for Sri Lanka and the Bank. Despite expected slowdown in GDP, the country has achieved a satisfactory growth when viewed against many other comparable countries.
This growth story was reflected in the performance of the Bank amidst a challenging business environment. In this environment, Treasury faced several challenges in managing the liquidity and interest rate risk of the Bank whilst keeping an eye on the Bank's exchange rate exposure.
The exchange rate came under pressure once the CBSL withdrew from the USD/LKR peg in mid February 2012. The decision allowing the exchange rate to move more in line with the monetary policy helped to safeguard the diminishing foreign reserves of the country. As a result, the demand for imports reduced due to the high cost of the US $. Other policy measures taken by the Government, especially sharp increases in vehicle import duty had an adverse impact on the motor vehicle import demand.
The Bank benefitted from the stronger USD with its long position in USD reserves. The exchange gains achieved in the Treasury were exceptional - well in excess of expectations. Moreover, this was achieved in a very competitive environment, under strict exchange control regulations, especially on forward bookings and in the midst of an unexpected devaluation of the LKR.
The division faced great challenge in managing the excess liquidity position which prevailed during the year whilst safeguarding the Net Interest Margin of the Bank. High market volatilities allowed Treasury to achieve significant performance during the year by correctly interpreting market direction in both foreign exchange and money markets. The Bank generated US $ 65.0 Mn. through a DPR (Diversified Payment Rights) facility from IFC in mid-March.
The upward movement of interest rates in the market during the first half of the year adversely impacted the operations in Government Securities. However, a significant drop in long-term interest rates in Government Securities during the 4th quarter paved the way for the treasury to earn trading profits.
Despite the substantial growth in deposit volumes, the deposit mix of the Bank deteriorated due to the increase in general interest rates in the country. As a result, the time deposits out of the total deposit base of the Bank increased to 57% compared to 49%, a year earlier. The CASA base of the Bank reduced to 44% from 51%,a year earlier. This resulted in an increase in the Bank's rupee cost of funds exerting further pressure on interest margins.
The total assets portfolio managed by the Treasury increased to Rs. 133.3 Bn. at the end of 2012 compared to Rs. 126.1 Bn. the previous year.
The Bank acquired a new treasury software to overcome the limitations in its current software suite and to cater to the growing needs of its business volumes. Further, it would serve the ever growing MIS and compliance requirements of the Bank in a more comprehensive manner. Phase I of the new system has been installed during the year, fulfilling requirements for the foreseeable future, whilst Phase II will see installation of the full system and complete migration to the new programme by mid 2013.
The following is a snapshot of initiatives undertaken by the Treasury aligned with the main strategic imperatives of the division.
Strategy | Extent of Achievement in 2012 | Desired Goals |
Achieve the status of 'Most Preferred Treasury Solution Centre' in the market |
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Improve the efficiency of the Treasury through operational excellence |
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Efficient Management of the Bank's financial assets and liabilities |
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The Bangladesh operations recorded impressive results and achieved most of the targets set at the beginning of the year. All key performance indicators were well above the budgeted levels. e Exchange volumes were also recorded satisfactory growth during the year. The division's profits and the NPA ratio are adversely affected due to a provision made on account of an off-shore customer.
International operations for this analysis are developed based on the stream of income generated outside the shores of Sri Lanka. Hence, the Bank's operations in Bangladesh, the activities of off-shore banking operations in Maldives and remittance operations of the E banking centre are discussed in detail here.
To place our operations within Bangladesh in context, we feel it is pertinent to briefly comment on the operating environment and country perspective.
The political situation in Bangladesh appeared to be stable in 2012 with the democratically elected regime still enjoying a three-quarters majority in the parliament. Bangladesh's sovereign debt was reaffirmed BB - for long term international credit and a B for short term credit by Standard & Poor's and Ba3 by Moody's Investors Service in 2012.
Growth of the Gross Domestic Product (GDP) in Bangladesh slowed marginally to 6.30% in 2011/12 fiscal year compared with 6.70% in 2011. The main reason appears to be the slowdown of agricultural growth. Although three-fifths of Bangladeshis are employed in the agriculture sector, three quarters of export revenues come from the garment industry. Bangladesh managed to maintain 6% plus growth over most of the last 10 years through strong export and remittance growth.
Healthy Inflows from wage remittances continue to be the backbone of the economy as growth in exports fell behind due to the continuous crisis spreading across the euro zone. Remittances have been buoyed by larger numbers of Bangladeshi workers moving abroad over the past year. Foreign Reserves too have improved even though adverse external demand and domestic supply constraints continue to be a drag on growth.
The inflation rate in Bangladesh averaged around 7% to 8% in 2012. Favourable international price trends along with deceleration in both food and non-food price rises helped to reduce inflation from all time high levels seen the previous fiscal year. Compared to the severe depreciation of Bangladesh Taka (BDT) close to around 15% in 2011, the currency was very stable in 2012 and in fact appreciated by 2.73%.
The Capital market volatility that was seen in 2010 and 2011 continued this year too, to a lesser extent.
Even though, banks faced intermittent liquidity shortages, overall the financial sector was resilient to the adverse movements and volatilities in the market.
2012 | 2011 | |
GDP (%) | 6.3 | 6.7 |
Inflation (%) | 8.56 | 10.17 |
AWDR (%) | 8.25 | 7.25 |
Per Capita (US $) | 848 | 818 |
The Banking industry in Bangladesh consists of 4 nationalised commercial banks, 4 Government owned specialised banks, 30 domestic private banks, 9 foreign banks and 31 non-bank financial institutions. In addition, the Bangladesh Central Bank accorded approval for 9 more commercial banks which are expected to be opened in 2013.
Commercial Bank commenced its operations in Bangladesh by acquiring the banking business of Credit Agricole Indosuez, a French multi-national Bank, in November 2003. From the commencement of the business, the Bank has established a ranking well above those of other regional banks in operation in the country. The Bank caters to a wide range of clientele which includes a healthy mix of corporate and retail customers and is backed by a wide product range.
Commercial Bank, Bangladesh has been rated AAA for the second successive year in 2012 by the leading rating agency CRISL (Credit Rating Information and Services Ltd.). Also ICMAB (Institute of Cost and Management Accountants, Bangladesh) has placed Commercial Bank as the third best corporate amongst the 9 foreign banks, next only to two big multinational banks operating in the country.
The Bank took over two Branches and two Booths at the time of acquisition of Credit Agricole Indosuez and the branch network has been expanded to seventeen outlets. Currently, our footprint consists of 10 Branches, 2 Off-Shore Banking Units, 6 SME Centres and 18 online ATMs including 3 Off-Site ATMs.
The customers of the Bank have access to over 3,200 Visa ATMS spread across Bangladesh. The Bank also offers a Global Dual Currency Visa Credit Card available in Classic and Gold card types for the benefit of our customers. Also, through Combank EFT (Electronic Fund Transfer), the customers have the option of transferring funds to any bank spread across Bangladesh. Commercial bank facilitates disbursement of worker remittances from Middle Eastern Exchange Houses through the branch network, EFT system as well as cash management agreement with 2 local banks.
Plans are afoot to collaborate with National Payment Switch in Bangladesh in order to provide ATM services at a lower cost and also to provide Internet and mobile based payments.
2012 was a significant year for our Bangladesh operations. Most of the targets envisaged in the Budget and the Corporate Plan at the beginning of the year was achieved by the Bank during the year.
2012 Mn. | 2011 Mn. | Growth Mn. | % | |
Total Deposits | 18,166 | 14,890 | 3,276 | 22 |
Total Advances | 15,977 | 12,290 | 3,687 | 30 |
Pre Tax Profit | 1,220 | 953 | 267 | 28 |
Post Tax Profit | 736 | 584 | 152 | 26 |
Annual compound growth rates for deposits, advances and post-tax profits in Taka terms since the inception of operations from 9 years ago were 19%, 22% and 24% respectively.
The Bank recorded a less than 1% NPA ratio from its inception due to the prudent lending propositions and the risk management measures in force. All key performance ratios - Cost to Income ratio, Return on Assets and Return on Equity remained healthy during the year. Prudent fund management allowed the Bank to record an improvement in net interest margins during the year. The Bank has increased the number of accounts both in deposits and advances at a steady pace from inception.
Bangladesh Operation contributes a fair percentage of the total post tax profit of Commercial Bank, and has been repatriating profits at regular intervals. The Capital Adequacy Ratio of the Bank is over 20%, against the regulatory requirement of 10%, mainly in view of the higher minimum capital requirement of the Bangladesh Bank, implemented since August 2011.
The Corporate Plan and the Budget of the Bangladesh operations which is being prepared along with the Sri Lankan operations set ambitious targets to be achieved during 2013. All Key Performance Indicators are expected to record improvements in the ensuing year. The NPA ratio is expected to remain below 1%. Improve operational efficiency and productivity through automation, especially the loan approval process is in the pipe line for 2013. Improving brand image by maintaining high quality service standards in the Bangladesh market is also envisaged during 2013.
The sizable Sri Lankan population who works abroad sends money to their kith and kin in Sri Lanka. Inflows from wage remittances forms part of the foreign funds inflows to the country where foreign exchange continues to be a scare resource. Although channelling of remittances through formal methods increased in the recent past, there are still a significant number who opt for informal methods to repatriate their monies.
The 'Com Bank e-Exchange', an internally developed money transfer platform assures Sri Lankan overseas a safe an efficient way to send money home. Over the past several years, the e-Exchange broke new ground and expanded its reach to a wider Sri Lankan expatriate population. Commercial Bank possesses over 15% of market share of worker remittances to the country with a growth of 19% compared to the previous year.
New arrangements with 10 more e-Exchange agents were finalised thus bringing the total to 76 overseas remittance agents by the year end. The Bank's Business Promotion Officers based overseas were increased to 13 to help aggressively promote e-Remittances and also to cross sell other products and services. The Bank also entered Singapore and Cyprus, which are two high potential markets for remittances.
Among the new agents who partnered with the Bank are Ria Financial Services, the third largest money transfer company in the world and Doha Bank, Qatar. Ria partnered with the Bank, connecting via the latest web service technology (The first in South Asia handling Ria money transfer systems) enabling a real time remittance payout in Sri Lanka.
The Bank held several events to promote its e-Remittance products and services and to also felicitate its partner agencies, during the year under review. Many of these events coincided with periods of religious significance, such as the Sinhala and Tamil New Year, Ramadan and Christmas and New Year, which periods are peak for money transfer activity. These were held both in Sri Lanka and overseas.
The Bank was adjudged the 'Most Productive Network in South Asia in 2011' by MoneyGram, the global funds transfer Company, at its annual South Asian Agents Conference in Goa, India in May 2012.
2012 % |
2011
% |
Growth |
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Volume | 19.8 | 14.6 | 5.2 |
Transactions | 18.5 | 9.5 | 9.0 |
The following is a snapshot of initiatives undertaken by the International Operations aligned with the main strategic imperatives of the division.
Strategy | Extent of Achievement in 2012 | Desired Goals |
To be on par with the multinational banks operating in Bangladesh |
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Establish Commercial Bank as a preferred retail and corporate banker in Bangladesh providing superior customer service |
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Become the market leader of the e-Remittance Business in Sri Lanka |
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Venturing into other regional markets |
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The Commercial Bank proposition cannot be delivered without vital inputs from a number of support service rendering departments. Prior to examining the performance of the departments, we must dwell briefly on an area that in itself constitutes a vital element of the 'support processes'.
We refer to the Bank's infrastructure.
As a benchmark private sector Bank, we have fully embraced the emerging technology that moves our service onto a constantly evolving platform of sophistication and modernity. Yet, as vital to our progress is our physical infrastructure; the brick and mortar complexes that stand for high visibility, strength and presence in profusion across every town and village of Sri Lanka.
This, together with professional, highly skilled and passionate people forms the core of the Commercial Bank persona.
One of the most powerful examples of the Bank's physical presence is, our ATM network - the widest and most numerous in Sri Lanka by a long chalk; highly visible along streets and highway and now in rail stations too; a beacon for customer patronage - and together with our branches island-wide, a potent sign of the Bank's competitiveness.
Each year, a substantial portion of the profits of the Bank is invested to improve the physical and technological infrastructure. This reduced the free cash flow of the Bank that would otherwise have been invested and become part of the fund-based operations of the Bank. Most importantly, it reduces the free capital of the Bank.
During the year, the Bank completed architectural designs for five new branch buildings and has acquired prime property in the heart of Colombo with a view to relocating some departments, thus easing congestion within existing offices and moving those in rented premises into their 'own home'.
In 2012, we opened 19 new branches/CSPs and relocated 19 MiniComs and 8 branches, whilst carrying out a major face lift for 25 branches and refurbishing 21 off-site ATM points. The Bank incurred a total cost of Rs. 1,367.8 Mn. on account of these improvements during the year.
Successful operations of the segments as detailed earlier are coordinated by several departments. Of these supporting service departments, the operating highlights of Information Technology Department, Recoveries Department and Marketing Department are detailed below:
The operating environment is characterised by business expansion, new channels, 'Green IT', process efficiency and an increased compliance posture.
In recognition of the evolving behaviour of our customers shaped by their ever busier schedules and adoption of newer technology, a significant leap forward was made during the year by introducing the following:
Our Internet Banking service was relaunched incorporating the very latest in functionality, user interface design, and security, and has been warmly embraced by our customers.
Our new Internet Banking system was also made available through mobile phones using Wireless Access Protocol (WAP), thereby extending the benefits of Internet Banking to a much larger customer segment.
The existing Tri-lingual Mobile Phone 'app' and SMS Banking system were complemented through the introduction of a new USSD Mobile Banking system. When combined with Mobile WAP, the Bank remains the only Sri Lankan bank to provide 4 choices of Mobile Banking thus demonstrating our commitment to both customer convenience and social inclusion.
Traditional branch and ATM channels grew to 227 and 555 respectively at the end of the year. Further, we introduced 5 Cash & Cheque Deposit KIOSKS during the year in review.
Customer convenience was enhanced with the following developments.
A Loan Origination System (LoS) was introduced to reduce turnaround time while increasing the quality of credit decisions. The system also positions us well to support business growth without a proportional increase in back-office costs.
In support of the customer charter, Digital Signage was introduced at approximately 50 locations giving customers clear visibility of products, services and rates.
Customer Service and Risk Management were enhanced with wider use of SMS Alerts for defined transactions.
Our commitment to the environment and society was underlined by a drive to encourage customers to adopt e-Statements. We have also completed the first phase of a strategic initiative to stop the use of paper for deposits and withdrawals by becoming a 'voucher less' bank. When considered alongside our previous achievements in lowering power consumption through Server Virtualisation, we have shown that 'Green IT' is a reality and something the industry as a whole, must aspire to.
Recognising the growing complexity of Business Continuity, the Bank relocated its Disaster Recovery Data Centre to a purpose built facility. This allows us to retain control of all infrastructure and data, while leveraging proven facility management expertise.
Recent upgrades to network bandwidth have enabled the wide-spread use of e-Learning, resulting in easier access to quality learning and encouraging competency development.
The expansion of e-Claims and introduction of e-Leave and e-Attendance systems have delivered process efficiencies and cost savings.
The Bank was successfully recertified in ISO/IEC 27001 and remains the only Sri Lankan bank with this Information Security certification.
The Bank incurred a total IT cost of Rs. 632.3 Mn. to improve its technological interface of the Bank during the year.
In the coming year, we expect to see an increase in the use of alternate channels provided during 2012 as well as those planned for 2013. The Bank also plans to reduce electricity consumption by deploying 'smart' devices. Investment in security and compliance will continue to grow and we will provide tailored services based on our insight of customer behaviour.
Recovery of loans and advances disbursed is one of the important functions directly contributing to the success and well-being of the Bank.
The Bank has a well defined and properly documented process for recoveries clearly demarcating the functions of the branches and those of the Central Recoveries Department.
The Central Recoveries Department of the Bank is entrusted with the task of assisting the branches to accomplish early recovery of non performing advances, thereby maintaining the targeted NPA Ratio of the Bank. Further, the department makes timely loan loss provisions in line with regulatory directions and the Bank's provisioning policy and monitoring of all reschedules/restructuring of advances carried out in the Bank.
Performance Highlights
2012 | 2011 | |
Gross NPA ratio (%) (net of interest in Suspense) | 3.4 | 3.4 |
Net NPA ratio (%) (net of interest in suspense & specific provision) | 1.8 | 2.1 |
Provision cover (%) | 45.5 | 39.5 |
Contribution to P&L from NPA recoveries (Rs. Mn.) | 3,326.0 | 2,704.1 |
Advances which languish for more than 12 months in non-performing status are monitored by the Recoveries Department. Early recovery of non-performing advances of each region has been allocated to an experienced officer of the Recoveries Department. Regular discussions with the Recoveries Department and the officers at our branches with regard to the action to be taken and speedy implementation of such actions for the early recovery of NPA s have immensely helped the Bank in maintaining low NPA targets. All litigation and 'parate' execution matters are closely followed up by the Recoveries Department.
The Bank adopts a flexible approach in initiating recovery proceedings by evaluating each case on its merits.
We always opt for negotiated settlement of NPAs, as opposed to legal recourse, in order to bring mutual benefits and time and cost saving, both to customers and the Bank.
During the year, special training programmes were conducted by the Recoveries Division for the entire cadre of Branch Managers, Branch Recovery Officers and the Regional Recovery Officers to disseminate knowledge on negotiation skills and recovery strategies.
With the intention of curtailing inflows to the NPA, the Bank has assigned dedicated regional recovery officers across the network. In addition to this, the Branch Credit Monitoring Unit (BCMU) is closely monitoring the advances which display early warning signs of reaching NPL status, and provide details of such advances to the branches to enable them to take appropriate and timely action to prevent such advances being moved in to NPA.
The Bank of its own accord, adopts a more stringent provisioning policy than the regulatory requirement. As a result the Bank has made a total provision of Rs. 3,183.5 Mn. during the year 2012. These provisions have assisted the improvement of Bank's provision cover from 39.5% to 45.5%.
The Credit Monitoring Unit (CMU) which is also a part of the Recoveries Division, monitors and ensures that the reschedules/restructuring of advances are carried out strictly in line with the existing regulatory requirements.
Monitoring of reschedulements includes placing the advances in proper classification category and also de-classifications, as per the regulatory guidelines.
2012 was a very lively year in the marketing calendar of Commercial Bank. Numerous marketing campaigns were carried out during this respective year, apart from very successful new product launches, which gave the Bank a notable competitive edge, visibility and brand equity. Forging new relationships while going the extra mile to serve customer needs and seeking ways for continuous process improvement, the Bank takes great pride in the recognition derived in terms of its plentiful accolades.
The year 2012, started off with a fully fledged corporate campaign under the new corporate brand positioning theme 'For a Better Future' which was communicated to a broad audience through Above The Line and Below The Line media as well as branch visibility material. The campaign appealed to different customer segments of the Bank starting from children, youth, executives, housewives to the white-collar executive.
Strategising to orchestrate more focus on the Bank's deposits portfolio, the Bank concentrated more on savings products throughout 2012. In keeping with the increasing trend in interest rates in deposits, Commercial Bank maintained Top of Mind Awareness on its popular generic range of deposits as well as specialized savings accounts such as Arunalu and Isuru Children's Accounts, DotCom Youth Savings Account, Anagi Women's Savings Account and Udara Senior Citizen's Savings account which offer higher interest rates and benefits over its competitors.
Accordingly, special marketing campaigns ranging from mass scale communication endeavours as in Above The Line advertising to web and outdoor advertising as well as brand-specific sponsorships were carried out to endorse the specialised deposits products while tactical advertising was activated highlighting the interest rates of term deposits and specialised savings deposits products. The Bank also launched a general savings marketing campaign during the first quarter of the year.
Upon identifying some of the most potential customer segments, Commercial Bank launched a brand new savings account named Anagi Women's Savings Account for women with special interest rates and other benefits. An integrated marketing campaign was launched, throughout the island with special mobilisation campaigns targeted at women, through the Bank's branch network. Anagi account has become the breakthrough, fastest growing specialised savings product at Commercial Bank.
Another potential segment identified as having great future potential in bringing profitability to the Bank is the youth. Hence the Bank re-launched the DotCom Youth Savings Account with a complete new outlook in marketing communications creating great appeal to the younger generation of today. The relaunch too included a fully fledged mass communication campaigns supported by very innovative web and social media advertising with branch-wise and outdoor promotions.
The Bank continued to promote its Arunalu Children's Savings Scholarships programme during 2012. Over Rs. 4 Mn. worth of cash prizes were disbursed to Year 5 Scholarship winners both at a school and district level. Arunalu also hosted a grand event on World Children's Day with media collaboration in which, the Bank conducted special activities and games for children with branded give-aways and attractive cash prizes for the participants. Over 15,000 children and adults participated in this event.
The Bank relaunched its corporate website combining rich content and modern design, enabling easier navigation with a range of improved features such as the 'Search' function that enables users to find information on the website through keywords or phrases; a facility to download application forms related to loans, account opening, deposits and similar requirements; 'loan calculators' related to home and personal loans and details on interest rates for deposits and loans. The site also includes news blogs, foreign exchange rates, an easy to find locator for Commercial Bank's Holiday Banking centres and 365-day Banking centres, branches that offer extended banking hours and Supermarket banking centres.
In addition to the above marketing activities, the Bank conducted a plethora of other promotions, which are summarsied under different product lines as detailed under respective segments of the Bank.
The above endeavours gave the Bank immense mileage in enhancing corporate and product brand visibility amongst the targeted customer segments while the brand equity of the Bank too saw a considerable growth, giving Commercial Bank a superior competitive edge in its marketing activities within the banking and financial sector in Sri Lanka.
The Bank as a policy does not outsource key functions involving the use of its strategic capabilities since these are an important source of competitive advantage. However, it is always exploring the possibilities of outsourcing non-key functions, it will optimise sustainability and returns to stakeholders.
The Bank periodically evaluates the credibility and capability of partners selected to provide outsourced functions.
The functions outsourced by the Bank include:
Commercial Bank holds 94.55% of the share capital of the Commercial Development Company PLC. The Company owns the Head Office building and continues to rent it out to the Bank whilst providing various other value added services to the Bank.
During the year, the Company expanded its staff strength with the recruitment of staff outsourced to the Bank.
The Company also carried out a major renovation project to improve the condition of the Head Office building which significantly affected its growth in profits. In addition, a drop in revenue from its vehicle hiring business also adversely affected the bottom line of the Company.
Despite the extra costs incurred for renovation of the Head Office building, net profit for the year increased by 36% during the year. This was mainly due to a drop in depreciation and interest cost on leases obtained from the Bank.
The Company is exploring the possibility of enhancing its business operations further with the Bank by providing other maintenance services to its parent company.
One Zero Company is a 100% owned subsidiary of Commercial Bank providing information technology services and solutions to the Bank as well as outside customers. Its main areas of business are the supply of professional and skilled employees, support services, post warranty maintenance, software development and hardware and software sales. The majority of its business was conducted with Commercial Bank of Ceylon PLC. The Company is the partner for many renowned IT brands in Sri Lanka.
Process improvements were recorded subsequent to migration of its accounting platform to Oracle Financial system during the year. In addition, many of the internal processes of the Company were streamlined to enhance productivity and efficiency of the Company.
The Company recorded a post tax profit of Rs. 20.7 Mn., a growth of 10% compared to last year.
The Company is in the process of exploring the possibility of enhancing its business operations further, specially extending IT maintenance services to branches in few other regions of the Bank.
Realising the potential in remittance business from Italy where a large Sri Lankan expatriate population resides, the Bank incorporated a fully-owned subsidiary by the name of Commex S R L Italy. The Bank had to reapply the money transfer licence which it received in February 2010 due to the change of laws relating to money transfer business in the European Union.
In January, 2012, the 'Bank of Italy' declined the re-registration application made by Commex Sri Lanka S R L to be a 'Payment Institution' authorised to engage in money transfer operations from Italy on the grounds that Sri Lanka has been identified by Financial Action Task Force (FATF) as a country having certain strategic deficiencies in its Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) legislation.
Thereafter, in July, 2012, Commex tied up with MoneyGram Payment Systems in Italy as a Sub Agent of MoneyGram handling remittances to Sri Lanka and other countries.
Accordingly, Commex is presently processing Money Transfers from its office in Rome through MoneyGram. In order to further widen the scope of this money transfer service and to cover major cities in Italy, negotiations are presently underway with a few other leading money transfer companies operating in Italy. Parallel to this, additional measures are being taken to reduce overheads at the Rome Office.
The Bank holds 22.92% of this venture capital company which is in the business of providing finance to Sri Lankan entrepreneurs mainly in the form of equity contribution. The Company has a rich history spanning to 22 years.
During the year under review, growth was recorded in revenue as well as profit after tax, due to the gain on sale of quoted shares as well as an increase in interest income.
Due to the lack of opportunities for venture capital financing in the market, the Company experienced a drop in the venture capital income, especially by way of dividends and debenture interest. The dividend income was affected due to the non-receipt of expected dividend from the hydro projects which were affected by the weather patterns that prevailed during the year and reduced tariff rates offered by the Government. The current bear market conditions in the Colombo Stock Exchange also affected the fair value of investments made in private placements of shares that are subsequently listed.
The Company hopes to enter into more fruitful business propositions with the current infrastructure developments taking place in the country. Equill wishes to invest in sectors such as leisure, health care, education, construction and hydro power to reduce risk by diversifying the investment portfolio and to enhance future returns.
The Bank has an indirect stake of 18.91% in this company through its subsidiary, Commercial Development Company. During the past 25 years, the Company has engaged in the business of insurance - both life and general. It is one of the premier insurance brokering firms in the country.
CIBL also boasts of a strong partnership with CA technologies USA and Pronto XI ERP Australia, making it one of the most technologically savvy firms in the industry. This ensures that all stakeholders of the Company are provided with instant solutions on par with world class standards.
As per the Annual Report of Insurance Board of Sri Lanka (IBSL) for 2011, CIBL has recorded the highest gross written premium among 46 Insurance Brokering Companies operating in Sri Lanka. The Company recorded a dip in its profits mainly due to reduction of new business opportunities.