By Nisthar Cassim
HSBC, which is celebrating 120 years in Sri Lanka on 1 July 2012, reiterated this week that the global bank is firmly rooted in the country, with great optimism for higher growth aided by the end of the war momentum and overall resilience.
The bank in 2011 had a record year with its leading positions in several segments of its core service offerings of global banking and markets, commercial banking, retail banking and wealth management.
This supremacy as well as the legacy of a over a century of innovative banking and support for socioeconomic development in Sri Lanka has reinforced HSBC’s resolve to remain a dynamic partner for progress for both corporate and retail customers as well as the Government and its agencies.
In response to rumours of a possible pullout as part of global restructuring, HSBC Sri Lanka and Maldives CEO Nick Nicolaou said: “I can categorically say that such rumours are unfounded.”
“We have a business model that works well in Sri Lanka, so our operations in Sri Lanka are in good shape,” Nicolaou told the Daily FT in an interview.
HSBC which styles itself now as the leading international bank also remains one of the most profitable commercial banks in Sri Lanka.
That apart, the overall dynamism and huge potential following the end of the conflict has made Sri Lanka, along with its strategic location amidst giant markets India and China, an important hub.
“Sri Lanka is a network market, a trading hub and has immense potential within for greater growth. All these make Sri Lanka exactly the kind of market HSBC wants to be in and delivering value,” Nicolaou added.
Reinforcing HSBC’s commitment for the long haul, the bank is investing $ 7 million for a major 18-month refurbishment program of its Head Office in Fort.
“We are investing in our business and people. HSBC remains committed and focused on building a strong sustainable business in Sri Lanka,” the CEO added. He said that global restructuring was to free up around $ 55 billion risk weighted assets and redeploy them in more dynamic markets. “In fact, of the 20 priority markets for HSBC, half of those are in Asia. Sri Lanka is amidst the growth engine of the world – Asia Pacific, which accounts for 60% of the Group profit,” Nicolaou emphasised.
As opposed to dominance of trade finance within HSBC Sri Lanka’s portfolio several decades ago, today there is a good mix with all core service offerings contributing equally.
“Yes trade finance is our bread and butter. Overall we have our unique selling propositions in global and corporate banking and as reflected by our growing portfolio of retail and personal banking with products such as Premier and Advance, our reach has increased considerably,” he added.
Last year HSBC saw its advances increase, whilst its dominance in credit card market is 26% in terms of number of cards issued and 45% as per spend. The launch of Visa Signature early this year has added further impetus to HSBC’s business.
“As a bank we can do well only if our customers do well,” Nicolaou pointed out, adding that HSBC has been conscious of this and remained steadfast in empowering its customers, be it institutional or individual.
“For example for corporates, we just don’t lend money but we provide a total package of solutions,” said the CEO of HSBC Sri Lanka, which at present has 17 branches including one in Jaffna, opened in 2010.
The bank also takes pride in having supported the rapid expansion in infrastructure in the country. “During the past five years we were engaged in financing worth over $ 2 billion for infrastructure areas such as roads, bridges, telecom, tourism and power (including three of the four wind powers set up in the country),” Nicolaou said, adding that the future pipeline looks robust.
HSBC also has a unique distinction of being the only bank to have been engaged by the Government in all of its sovereign bond issues. It is also a joint Lead Manager, Bookrunner and Underwriter for the planned $ 1 billion sovereign bond whilst it played a key role in the country’s first corporate global bond of $ 500 million of Bank of Ceylon, which saw an oversubscription of seven times. HSBC also helps other banks in syndicated loans.
Commenting on prospects for 2012, the HSBC Sri Lanka CEO said that due to global factors, a slowdown in economic growth was inevitable, due to the global economic situation – especially in Europe. “We have had two years of 8% growth and in 2012 there will be a slowdown, yet an economic growth of 6 or 7% is commendable in the current global context,” Nicolaou pointed out.
Notwithstanding the outlook, during the first five months of 2012, HSBC has had reasonable growth in its business whilst first quarter has been “quite strong”. “Our asset portfolio is very clean and so far we haven’t seen any signs of stress,” he said, adding that HSBC also has more stringent liquidity and provisioning policy than what is set out by the Central Bank.
“Being a well capitalised strong bank is the best value we can give to our customers, especially during difficult times,” Nicolaou said. Based on feedback from its top clients, he is also optimistic that exports will rebound in the latter half of the year, whilst he also agrees that the rupee will strengthen as a result of envisaged robust foreign inflows, a moderation of imports and relatively low oil prices.
“The Government and the Central Bank have so far taken the right policy measures to manage Sri Lanka out from current challenges and we remain confident,” the HSBC Sri Lanka CEO added.
With regard to the overall banking industry in Sri Lanka, Nicolaou noted that the key challenge was to remain operationally efficient and attractive to shareholders/investors. For this, he said going forward some degree of consolidation was required in the Lankan banking industry.
“At present the industry is too fragmented, which means the optimal structure is not being achieved. The average return on equity is low in the regional context and in the future, to attract more capital, investors and shareholders would look to higher returns,” he added.
Nicolaou also emphasised that HSBC in Sri Lanka was not only making good business but doing it in a socially responsible and sustainable manner. “Our corporate sustainability program encompasses some critical sectors and communities,” he said. HSBC’s support covers livelihood development, environment conservation, education, heritage, art and culture and sports.
Globally HSBC serves around 89 million customers through four global businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. The HSBC Group’s network covers 7,200 offices in 80 countries and territories in six geographical regions: Europe, Hong Kong, Rest of Asia-Pacific, Middle East and North Africa, North America and Latin America. With assets of US$ 2,556 billion at 31 December 2011, HSBC is one of the world’s largest banking and financial services organisations.