Management Discussion and Analysis

Prudent Growth


The Bank’s focus has always been on creating value for all its stakeholders in the short, medium, and long term. This approach requires a delicate balance of maximising our revenue and profitability in the present without compromising the Bank’s ability to keep delivering value year-over-year. We conceptualise this strategy as prudent growth. It is a strategy of creating long-term value through an emphasis on pure banking and a well-diversified asset base, supported by best in class risk management and corporate governance practices and underpinned by commensurate amounts of liquidity and capital. It is a strategy that is built on closely monitoring emerging economic, social, and technological trends and developments in both local and global markets, and taking an agile, pragmatic approach to growing our business in response. A prudent outlook and a conservative risk profile, after all, have been the key to our sustained, long-term performance, and have driven our growth at an even and healthy pace.

Our very identity rests on a commitment to prudence, and this quality has always been our hallmark; the Bank is deservingly famous for its compliance to both the letter and spirit of the law. The Bank places a premium on the trust and confidence of its customers – a strength we have carefully cultivated for a century. Our rigorous Codes of Ethics & Conduct guide the decisions and actions of our Board and the staff as well as our relationships with external partners, and ensure that the Bank remains untainted by corruption or malpractice. Through on-site audits and online surveillance – whose scope and frequency are determined using a risk-based model – the Inspection Department reinforces the anti-corruption provisions of the Code. Similarly, the Bank’s Anti-Money Laundering Unit, under the purview of the Compliance Officer, utilizes systems on par with global standards in its monitoring and reporting of suspicious activities to the Financial Intelligence Unit (FIU) of the CBSL.

It was our commitment to prudent growth that allowed us to stay the course in the midst of a challenging, unforgiving economic context this year, where many of our resources had to be redirected towards managing deteriorating asset quality and the consequent rising of NPAs. In this context, being prudent meant growing our business in a controlled fashion, with an emphasis on asset quality and stability, appropriate levels of deposit mobilisation, and a strong involvement from treasury to manage funding and excess liquidity. Moreover, we followed a prudent approach in all aspects of our operations, from touch-point expansion, cost management, recruitment, and upgrading our technology to support value creation in the future.

Our very identity rests on a commitment to prudence, and this quality has always been our hallmark; the Bank is deservingly famous for its compliance to both the letter and spirit of the law.

Given the capital intensive business the Bank is in, profitability is a key determinant of its future well-being and is the deciding factor of the extent to which it is able to sustain value creation in the short, medium and long term. In order for the Bank to profitably deliver this value proposition, it promotes integrated thinking within the Organisation by creating awareness among all its staff categories of the role they play in this process. Social and environmental considerations too are integrated into all the Bank’s core business activities while employees are encouraged to pursue activities that range from responsible lending, investments, new product development, procurement etc. to social and environmental initiatives such as recycling, use of renewable energy, and the support of culture, health, and education etc. This ensures that the Bank successfully achieves its role as an intermediary by balancing the conflicting interests of stakeholders and optimising the trade-off between risk and return.

The Social and Environmental Management System (SEMS), an integral part of the loan approval process, is pivotal for managing the Bank’s risk profile and making the lending and investment activities responsible. It evaluates the feasibility of projects based on cash flows while also screening all business and project loans to ensure that they are monitored on an ongoing basis. This process has proved to be efficient in helping entrepreneurs and customers maintain the sustainability of their operations. In addition, the Bank also offers facilities for the adoption of environment-friendly technologies on concessionary terms and conditions.

For further details on our wider approach to prudent growth, please see discussions under the strategic imperatives of Customer Centricity, Leading through innovation and Operational Excellence.

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