The Sri Lanka-based Commercial Bank of Ceylon PLC (CBC) wants to expand SME (small and medium enterprise) lending in Bangladesh with an aim to migrate small businesses to corporate status. The bank that has focused on trade and finance will now strengthen retail banking amid rising spending power of consumers.

CBC Bangladesh started its operation in 2003 by taking over the Bank Credit Agricole Indosuez. At that time, it had only four operating units in Bangladesh, catering to large corporates and multinationals. At present, the bank has expanded its business horizon to all areas of banking and is doing really well in the country by catering to clients from all walks of life. It maintains less than 1% default loan, which helps it keep lending cost low.

Najith Meewanagechief executive officer of CBC Bangladesh, shared the business plan of his bank at an interview with The Business Standard recently. Meewanage sees huge business potential in Bangladesh as many Sri Lankan entrepreneurs are coming here to test the business environment in different sectors. His bank is facilitating them to grow Sri Lankan businesses in Bangladesh. Still, more than 90% clients of the bank are Bangladeshis.

Tell us about the financial performance of CBC in Bangladesh.

The year 2021 showcases the bank’s resilience and progress under challenging circumstances. The bank turned into a strong performer staying on plans towards sustainable growth reflecting the effectiveness of its strategies.

In all key areas of business activity, the bank has posted good performance and has met the targets set in the corporate plan while maintaining expected growth levels.

The size of the total balance sheet of the bank increased by Tk1,372crore by recording over 15% growth in 2021 to reach the asset base of Tk10,000 crore. Its total operating income also saw reasonable growth. On the other hand, the operating expenses were effectively managed. The bank logged Tk167.3 crore profit after taxes. Most probably, the bank has the lowest non-performing ratio in the industry and it stood at mere 0.48% as of December 2021. The bank has managed to continue to maintain bad loans well below the industry standards throughout despite various challenges induced by the pandemic in the past two years.

What is the bank’s business plan for the next five years?

While the future holds many challenges, we are confident of our ability to make astute judgments of our directions and essentially the way forward.

The compulsory Covid-related tough rules brought in significant transformations in the banking industry with FinTech encroaching with payments and settlements areas of conventional banking services.

With our customers gravitating towards digital platforms’ simplicity and convenience, we have embraced the ethos of customer centricity to deliver enhanced value to all our stakeholders. Given the importance of the SME sector, we are focusing heavily to build a robust SME portfolio that our retail banking area is sharpened on expanding. Our intention is to gradually migrate these SME to corporate status as they grow.

We are looking to strengthen our retail banking and SME foot-print in Bangladesh in addition to our presence as one of the leading banks in catering to diplomats and corporate clients. Our treasury is also focused on increasing trading activities to make a significant contribution as in the past years.

What are the challenges foreign banks face in banking operations in Bangladesh in terms of providing customer service and regulatory rules?

The financial services sector has witnessed the entry of new players with many bringing with them the technology to disrupt the conventional industry. CBC Bangladesh, being a foreign bank, is resolute in its stance of keeping abreast of these challenges by embracing innovation and operational excellence.

There is greater complexity in the global risk environment with significant geopolitical dynamics as well as concerns about the risk of the financial sector to finance terrorism and money laundering. The Bangladesh Bank provides commendable support through structural bank regulation initiatives.

Default loan is a serious problem in Bangladesh. What is your observation about the cause of default loans and what measures should be taken?

It has always been the case that credit operation and performance of a foreign bank always supersedes those of indigenous private commercial banks and state-owned banks.

Effective use of technology, prudent credit management through internal credit policies filters and discourage loan defaults and reduce the effect on financial performance of a bank. The culture of the institution plays a centric role.

What is your observation about the banking culture in Bangladesh?

Bangladesh’s well to do most of the companies are family run and so is the banking sector. Management soundness differentiate them from understanding credit risk systematically and ultimately measure and manage credit risk dynamically for financial system stability in the country.

What challenges do you see for Bangladesh’s banking industry after the normalization of monetary policy in the post-pandemic era?

Higher aggregate demand for goods and services turns into private credit growth and higher inflation. Higher aggregate demands require more resource allocation from the wealth generating sector that generally split over to foreign currency. We are very hopeful that the Bangladesh Bank will deploy the right countermeasures to arrest this environment as it has proved by staying with a stable dollar-taka rate since 2013 to 2020, providing higher confidence for entrepreneurs to achieve phenomenal GDP growth.

What prospect do you see in Bangladesh for foreign banks to grow?

Every foreign bank wants to own its share of the growth story here in this great nation. What foreign banks generally introduce to each financial market is dynamic efficiency. The foreign banks are instrumental in bringing down the cost of transactions and increasing the quality of human capital in the respective banking industry. Moreover, they are better in external shock management. As a result, foreign banks in Bangladesh can be expected to play systematically more roles enhancing returns to all stakeholders.

Tell us about the recent achievements of your bank.

CBC has been adjudged as the “Most Sustainable Bank in Bangladesh” at the close of 2021 by the Dubai-based International Business Magazine, which honored best-in-class achievements of organizations across various spheres related to international business and finance. The title recognizes the sustainable and stable growth that Commercial Bank of Ceylon Bangladesh has demonstrated over the years.

In 2021, CBC Bangladesh was also recognized with top awards by two UK-based institutions – the Global Business Outlook (GBO) magazine and Global Economics, financial publications that recognizes best performers in various financial sectors, worldwide.

Both these publications crowned CBC Bangladesh the “Best Foreign Bank in Bangladesh” – a title that acknowledges the bank’s resilience in the face of competition from local and international banks, its service excellence and dedication towards serving the customers.

The bank’s progress in 2021 was also underlined by its “AAA” (Triple A) credit rating from Credit Rating Information and Services Ltd (CRISL). This was the 11th consecutive year that Commercial Bank Bangladesh was given a “AAA” long term credit rating, which is the highest credit rating given to a financial institution in Bangladesh by CRISL.

The latest rating is the outcome of an in-depth analysis of the operational and financial performance of the Bank along with an assessment of relevant quantitative and qualitative factors.

As a responsible corporate, CBC expanded its business for the SME sector as well as the retail sector which goes with the bank’s strategy to reduce concentration on large entities only.

Being a foreign bank, we have achieved 100% on providing stimulus packages to Covid-19 affected borrowers which show our commitments especially on the hour of need. Our efforts were duly recognized by the Bangladesh Bank and as the only foreign bank, CBC received a “Certificate of Appreciation” from the central bank.