LMD 100 Q&A
NATIONS TRUST BANK
Q: How has the banking sector been impacted by the economic climate in Sri Lanka? And what is the medium-term outlook?
A: The banking sector is the bellwether of the economy; and the performance of the economy is generally reflected in the banking sector’s performance.
Given the magnitude of the global impact of COVID-19, I feel that Sri Lanka’s banking sector has been resilient thus far. I’d like to congratulate the Central Bank of Sri Lanka and the government for responding quickly, and implementing several timely measures to minimise systemic shocks during these unprecedented times.
We believe that the quantitative easing witnessed during the past two years will gradually wear off in 2022. Further, major issues such as global supply chain disruptions, and sharp increases in world energy and commodity prices, are likely to be short term.
The medium-term prospects of the global economy look very encouraging, and green shoots of progression can be expected from many countries. However, growth prospects are unequal for different economies in the world.
Q: What is your take of the state of business, given the multiple crises the country faces?
A: As we’re integrated with the global economy, we must face world price fluctuations. They impact developing countries more than developed nations.
The debt burden has been challenged due to high debt levels, economic disruption and associated cost escalations, increased spending on medical care and vaccinations, the impact on foreign currency earnings due to the collapse of world tourism, and disruption of world trade.
Indeed, the biggest challenge faced by developing countries is the unsustainable foreign commercial debt.
In my opinion, the current debt situation is not something that happened overnight. The pandemic may have accelerated it but we had a fragile economic structure, which required long overdue reforms. These are the consequences of actions taken over a couple of decades.
Very early in the pandemic, Nations Trust Bank was inspired by the words of Sir Winston Churchill: “Never waste a good crisis.” Many opportunities unfolded during the crisis – and we believe there will be a renaissance of new ideas, experiments and various innovations in a post-pandemic world.
However, the economic impact of the crisis will outlast the pandemic itself, which will be challenging not only for the banking sector but many other segments globally. There’s a silver lining in every dark cloud: if you are sharp enough and focussed, one could seize the opportunities and build scale in a post-pandemic world.
Q: How is the bank faring under existing macroeconomic conditions?
A: We have a highly diversified franchise, which comprises a portfolio of businesses that serve different segments of the market.
Our strength has been the spaces that we operate in even though they’re very different. High tide will shift the boats; and depending on the strength of the boats, the impact would be felt differently. I’m happy to say that the impact of economic conditions on our operations is manageable.
The calibre of clientele, portfolio and franchises we have carefully built over the years made it possible for us to come out of the pandemic much stronger. This is also due to the dedication of our staff who have worked tirelessly during these trying times.
Due to the hard work of the government, medical professionals and law enforcement authorities, we think the worst of the pandemic is behind us – we’re now in a recovery phase. Even at the peak of the pandemic, we worked on improving ourselves, which helped us with our aggressive deployment of digital capabilities.
We’re happy to say that we now provide best in class digital capabilities to corporate-business clients and individual customers alike. Even amid the interruptions caused by the pandemic, the inconvenience to our clients was minimal due to the digital platforms we had in place.
Q: Could you outline the impact of recent events on Sri Lanka’s external trade prospects?
A: When export volumes are dramatically lower than imports, the trade deficit reaches a point where you must borrow to finance the gap. A huge reduction in some of the main export income flows when there is a high level of debt leads to a crisis situation.
This emphasises the fault lines of the country’s economic structure. The excessive debt load – coupled with disruptions to inflows from tourism – has undermined our ability to settle debts. The timely actions taken to manage the economy have somewhat mitigated the situation.
Restrictions on non-essential imports, and encouraging exports and export related production, are an essential part of the much needed reforms. Even though there will be hardships in the medium term, these economic reforms are necessary to ensure that the profile of Sri Lanka’s economy changes.
Q: To what extent do innovation and technological changes impact the banking sector?
A: Technological advancements in the banking and financial sectors were already an ongoing process when the pandemic took root – this became the centre of conversation only during COVID-19.
In a hyper competitive environment like the banking sector, you must continue to innovate and have a mindset that looks to do things differently; that is the only way to survive and thrive.
About 80 percent of our banking transactions take place digitally. Delivering value to our stakeholders through innovation and embracing appropriate technological changes are some of the fundamental ideologies of Nations Trust Bank. Transforming the bank from a marketplace to a ‘marketspace’ is one of our fundamental propositions.
Q: In your opinion, how can Sri Lanka improve its ease of doing business and competitiveness on the international stage?
A: It is a matter of picking your battles wisely; striving to excel in every sphere is unrealistic.
For example, the level of intellect of Sri Lankans is unparalleled in comparison to global benchmarks. When people leave the country, some rub shoulders with best in class players around the globe.
In my opinion, rather than trying to do several things, we should focus on the few things that Sri Lanka is known for and develop them. This strategy will undoubtedly lead to more growth prospects for the country.
We have to review our productivity in many spheres – and enhance productivity and capacity. We can’t be complacent. The Port City’s economic zone is a fantastic idea and the benefits will be long term.
Q: Could you outline the bank’s plans especially in the context of expansion?
A: The financial sector has tremendous potential. Evolving to keep pace with market requirements in addition to physical expansion is most important. The bank has a dynamic team of employees with an engaging culture.
Furthermore, we have mapped the next level of our digital playbook. In addition, we will also look at addressing opportunities in the region, which will complement our capabilities. Nations Trust Bank will continue to revolutionise Sri Lanka’s banking experience.
