SPECIALISED SAVINGS PRODUCTS AND CONVENIENCE KEY TO DEPOSIT GROWTH: COMBANK
With its deposit base growing by more than Rs.100 billion a year, Commercial Bank is one of the preferred banks in Sri Lanka for savers, and has developed products for different customer segments and age groups to ensure it has products for every stage in life, from infant to senior citizen. In this interview, the bank’s Personal Banking Deputy General Manager Sandra Walgama elaborates on some of the complexities of mobilising and managing funds. Following are excerpts of the interview:
Q: Mobilising deposits is one of the principal activities of a bank. Is Commercial Bank satisfied with how its deposit base has been growing?
We are quite satisfied with our deposits growth. The bank’s deposits portfolio witnessed a growth of 14.95 percent and stood at Rs.850.128 billion at the end of the year. This was the second successive year in which the bank’s deposits grew by more than Rs.100 billion.
A steadily growing deposit base is a prerequisite for any bank and is a reflection of the stability and customer confidence it holds. The bank has a well structured and strategic decision making process and always assesses numerous internal and external factors rather than only depending on market conditions to dictate deposit growth. The targets and goals are set with the big picture in mind.
Q: How does the bank manage the ratio between savings and fixed deposits to keep its cost of funds at manageable levels?
This is the basic function of Assets and Liabilities Committees of banks and all of them work hard towards striking the right balance. This is dependent on many criteria, such as CBSL rates, market liquidity, credit growth and so on.
Any business organisation has to be mindful about the market conditions when arriving at key business decisions. It is the same for banks. The Assets and Liabilities Committees of banks have a tough task ensuring that competitive rates are offered to customers whilst supporting the business growth of the bank.
Q: Why are CASA ratios declining and how does the Bank address this?
When the gap between the savings rate and the FD rate widens, there is always pressure on the CASA. Therefore, one of the ways the bank responds to declining CASA ratios is by enhancing convenience for savings account holders, with a view to encouraging them to make us their preferred bank. This is something that Commercial Bank has done very effectively, by constantly increasing the number of customer touch points. Our ATM network currently at 756 terminals is a good example. With an uptime of about 99 percent, it is one of the key reasons customers open savings accounts with us.
Q: What is the ideal deposit mix for a bank the size of Commercial Bank?
There is no fixed formula for this. It all depends on a bank’s appetite for lending. As a general rule, we would like our CASA ratio to be in the high 40s to low 50s.
Q: How important are interest rates, given that a high percentage of the bank’s deposits are under Rs.100,000 and about half are below Rs.5,000?
For the majority of owners of standard or ‘vanilla’ savings accounts, the rate is not particularly important, because they are looking mostly for convenience and ease of access to funds. Nevertheless, these accounts do result in some savings, because in most cases there is always a residual balance. For the serious saver segment, we offer a wide range of accounts that offer higher interest rates, in return for maintaining a higher minimum balance or for keeping the funds for a longer duration. These accounts are designed to cater to the needs and aspirations of different segments of savers.
Q: Given the high percentage of small deposits, how can the bank promote savings as an important economic activity?
We can promote savings by being creative on value addition, besides offering higher interest rates. This has to be balanced to ensure that we do not push our cost of funds too high. We also have to be mindful about the competition. A good example of a creative approach to promoting savings is our ‘Millionaire’ account, which is a target-based savings scheme that offers a higher rate of interest.
Q: How does the bank’s savings product portfolio cater to different segments of society?
We have developed savings products for specific demographics, based on gender and age, and we now have a product for every stage in a person’s life, from infancy to retirement. We have a savings product exclusively for women and savings products for infants, school children, teenagers, young executives, entrepreneurs and senior citizens. These products are tailored to meet the needs of the respective segments.
Q: What, among these, are the most successful savings products of Commercial Bank?
In the Children’s savings category we have Isuru and Arunalu; for teenagers, Dotcom; for women Anagi; and for senior citizens Udara. In the General category open to all segments, we have Supersaver, Power Savings, and General Savings; for micro entrepreneurs we have Divisaru; in the Investment Account category we have Millionaire and Future Pensions Plan. All of these products are successful.
As the largest private bank in Sri Lanka our stability, transparency in operations and superior service has endured over the years. Commercial Bank has built a loyal customer base that has placed its trust in the bank.
Q: Does value addition to FDS make sense, considering that they increase the cost of funds?
A fixed deposit is generally a high cost product; value additions could add to the cost. FDS are very interest-sensitive and if some banks are offering higher rates, others may respond by offering value additions. Such value additions may not be perceived as adding to the cost of funds, but they do.
Q: Are there any categories of savers that have not as yet been tapped?
We have looked at every category of saver in our product development efforts, but within the categories already catered to, there are still some with potential for growth. One of them is the teenager category, where lifestyles and needs continue to evolve rapidly with technological advancements.
Q: How does the bank see savings evolving in the years ahead?
Banks will keep promoting savings as an important source of low cost funds. The development and spread of digital banking channels will also encourage savings, so the future for savings is positive.