Nations Trust Bank aims to build on Sri Lankan success

Sri Lanka’s Nations Trust Bank is a fairly young company, but its efforts in local communities and strong financial nous have marked it out as a success story for the future

June 25, 2012

What started as a local Colombo bank 13 years ago has quickly become one of the fastest-growing financial institutions in Sri Lanka. Today, Nations Trust Bank (NTB) continues to expand through clever business strategies and profitable partnerships. The bank has recently launched its 51st branch in the northern city of Nelliady. The region is only now beginning to recover from the 30 years of civil war that have ravaged northern Sri Lanka, and NTB aims to be at the forefront of this recovery; funding development, extending business-saving credit and engaging with the community. After years of political and economic turmoil, the country is now burgeoning; Sri Lanka was Asia’s second-fastest-growing economy last year and is expected to continue growing at a rate of around seven percent this year. The bank reported a net profit of over Rs1.5bn last year, a 41 percent increase from 2010. This phenomenal growth is due, at least in part, to the bank’s competitive outlook. It recently premiered its 365-day banking programme, which means it is open for business during weekends and holidays, and far longer than other financial institutions on the island. NTB’s main focus is on convenience for its customers, which is why it has also invested heavily in making sure its branches are open as long as possible.

“Each bank unit offers a fresh environment and there is no rush to get the customer out and the transaction done. we are welcoming to our customers,” says CEO Saliya Rajakaruna.

Young, but growing quickly
But Rajakaruna attributes the bank’s enduring success to more than great customer relations. “We are a young bank, 13 years in the making,” he says. “We have a fresh outlook on many of the age-old problems businesses and banks encounter and because of that we are able to react quickly to our customers requests and needs.” Indeed, the bank’s comparatively brief history is replete with successful mergers with other financial institutions, culminating in the opportunity to offer and issue American Express Cards to its customers.

After a fruitful 2011, NTB has big plans to ensure sustained growth. It will continue to open new branches in increasingly diverse areas of the country in order to attract the widest variety of customers possible. By bringing new branches to more remote parts of the island, the bank will be able to target more small and medium business that would otherwise not have ready access to banking facilities. “We want to engage the local businesses so we are taking our products to where they are located. These expansions will ensure we keep our growth momentum,” says Rajakaruna.

Lying just off the southern tip of India, the picturesque island country of Sri Lanka has been tainted by over three decades of war. The conflict, between the national majority of Buddhist Sinhalese and the mainly Hindu Tamils, was only resolved in 2009 when the Sri Lankan government forces seized the last area controlled by the Tamil Tiger insurgents.

Since the end of the conflict there has been substantial reform of the financial markets; the Colombo Stock Exchange is one of the most modern in Asia, and as of January 2012, it has 275 listed companies and a combined market capitalisation of over $20bn. When addressing the 12th Doha Forum Economic Future Conference in May, President Mahinda Rajapaksa vowed to plough on with plans to transform Sri Lanka into a major economic and commercial hub. In 2011, Sri Lanka was Asia’s second-fastest-growing economy.

This is a sound strategy, as the Sri Lankan Central Bank has recently announced a lending ceiling for all Sri Lankan banks. In an attempt to curtail excessive credit growth in the country, bank lending has been capped at 18 percent over the previous year’s lending total for each bank. “When we closed the year in 2011, reporting 1.5bn rupees in profit, we aimed for a two billion rupee profit in 2012. But since that time there have been some not entirely unforeseen issues; the exchange rate against the dollar is coming under pressure, and the level of interest rates is rising. We expected that, but what was something of a surprise was the introduction of a blanket credit ceiling by the financial monitor. We have to curtail our lending budgets which will have an impact on our earnings, returns and capital utilisation,” says Rajakaruna.

But NTB continues to grow. Recently, the bank launched a Leasing Brand Campaign (LBC) in all of its branches, where once the services were only offered in Colombo and branches in the western province. Now every branch has at least one member of staff with expertise in leasing to advise customers. The main aim of the programme is to encourage customers to lease hybrid vehicles, instead of diesel and petrol based ones. “We also want to indicate to customers that we are interested in offering leases not only in passenger vehicles but also commercial vehicles, plant and machinery,” says Rajakaruna. Because the leasing programme is specifically based on an asset, we can take a view on that asset over a long period of time to obtain the repayments. It has been a very good motivational way to extend credit to the consumer focused on cash flow. And now we want to expand this programme.”

Working with the community
The LBC is an especially useful tool in the branches recently opened in Sri Lanka’s Northern Province, including the one in Nelliady. After the long civil war came to an end in 2009, Nelliady has emerged as a thriving town. NTB has been eager to contribute to that transformation and the new branch was a way to reach out to the local community.

“We want to rebuild, restart and re-engage the businesses that were there and were damaged,” says Rajakaruna. The American Chamber of Commerce in Sri Lanka has recently announced plans to offer grants and aid for private enterprises in Nelliady and other areas to help transform the region into a thriving, bustling regional capital. The bank has been pivotal in the development of small and medium enterprises (SME) all over the country, not just because of its top-rate loans and credit services but because of its expert advisory services, which coach SMEs in everything from investments to taxation. “We educate companies in terms of proper accounting; the importance of proper documentation; we introduce them to ideas about corporate governance. These advisory services accompany our loan products,” says Rajakaruna. Coaching and advisory services such as these can often be of immeasurable value to small businesses in rural Sri Lanka.

Recently, the bank has been reaching out to Sri Lanka’s diaspora in Europe, through a successful partnership with Colombo Money Transfer Services. Sri Lankans around the world currently remit over $5bn to their home country, and NTB found that a partnership with a money remittance company was the ideal way to support customers abroad. “As we speak we have a marketing team out in Europe,” says Rajakaruna. “There are many Sri Lankans’ in Italy, France and Britain. We have taken a team to Europe to talk to this diaspora about how we can help them with their remittances.”

The CEO is also quick to point out that NTB is more then just a bank: it strives to connect with the population. “Whenever we open a new branch we also have some kind of engagement with a local school whereby we provide some funding for facilities, or we donate books and equipment for a library or sporting facilities. We try to engage the local people whenever we open a branch.”

All of these attributes combined have made NTB one of the foremost financial institutions in Sri Lanka, bringing cutting-edge banking to a fast-developing nation. NTB’s aim is to continue to develop customer-centric solutions and raise its market share, in an effort to be the most profitable and respected bank in the country by 2015 or thereabouts.