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By Nisthar Cassim
The region's largest foreign bank and a leader in Sri Lanka the Standard Chartered Grindlays and Standard Chartered banks are jointly endeavouring to maximise not only the revenue but cost synergies as well to better serve the growing customer base and meet new opportunities and challenges. The two, which now style themselves as Standard Chartered Group (the Standard Chartered acquired the Middle East and South Asia operations of Grindlays Bank in August 2000), have already introduced a common IT platform as part of the integration process which in Sri Lanka is likely to be completed by year end. The integration
process involved streamlining of the operational aspects of the two banks
and introduction of new technology. While having an impact on the number
of jobs it has also created new opportunities for several of the staff.
For example, all divisions which functioned independently before have now
been integrated which has resulted in two divisions becoming one. The
acquisition and the need to remain a viable commercial entity especially
in the current economic times, internationally as well as within the
country, have necessitated a restructuring of the Bank. "The merger
locally has definitely given synergies of revenue such as combination of
the customer base of the two but it must be remembered that there is scope
for rationalisation of cost as well," Standard Chartered Group (SCG)
Senior Group Representative Wasim Saifi who is also the CEO of Standard
Chartered Grindlays told the Daily Mirror in an interview. He pointed out that
Sri Lanka is an emerging market for SCG with great growth prospects.
However at present the revenue contribution from Sri Lanka is a low 4%
within the MESA (Middle East South Asia) whereas in terms of staffing it
accounts for around 12% - the highest in the region, which includes UAE,
Pakistan, Bangladesh among others. The original staff strength when the
alliance became formal was slightly over 500 and currently stands around
460. When everyone
globally is looking to reduce cost and improve prospects of survival or
success and better serve stakeholder interest (that includes employees),
the eventual staff numbers do have a bearing. The sluggish economic
conditions in Sri Lanka and also globally in 2001 have also made the high
staffing numbers look much bigger. "Following a
merger it is important to look at maximising not only the synergies of
revenue but also cost. This becomes critical when your costs are on the
rise compared with revenue gains," Mr. Saifi explained. Last year Sri Lanka
reported its first ever negative economic growth since independence and
the synergies in the revenue aspect could not be harnessed to its maximum.
Nevertheless, the Bank is said to have finished 2001 relatively on a
satisfactory note though it could have been better. Though full year
results are pending as for published data, Standard Chartered Grindlays
net profit during the first six months of 2001 was up by 11% to Rs. 254
million while that of Standard Chartered Bank was down by 15% to Rs. 71
million. Performance in terms of asset growth was different with Standard
Chartered Grindlays suffering a decline of 2% to Rs. 15.6 billion while
Standard Chartered recorded a 9% increase to Rs. 10.3 billion. Their
turnover levels had increased by 10% to Rs. 755 million and 28% to Rs. 705
million respectively. The restructuring or
re-engineering process is not new at SCG. In fact soon after the two banks
forged the alliance locally they worked together and complemented and
consolidated wherever possible. Indeed it was in 2001 that the first phase
of the Voluntary Retirement Scheme (VRS) was introduced and was accepted
by around 60 staffers. It is believed that SCG had spent between Rs. 115
to Rs. 120 million in the first phase. The second phase of the VRS was
introduced recently and the Bank expects a further 100 employees would
accept it. The average compensation of the on-going VRS amounts to 40
months salary while there are cases where the maximum is 70 months. Mr.
Saifi said that the VRS was offered only to those who were identified as
surplus and a substantial number had accepted it voluntarily. However, the SCG has
come under some flak from trade unions who in their eagerness to appease
the membership is likely to have promised a bigger compensation for those
who are willing to accept the VRS while a few have declined the offer. Mr.
Saifi said that the VRS is very generous and it had been structured taking
into account the existing regulations. He also said that yesterday a
meeting took place with the Labour Commissioner who has fixed the next
hearing in a month's time. If the VRS goes through the SCB will be
comfortable with a staff strength of around 350. This, in his opinion,
will ensure a more efficient delivery of world class banking services and
products and make its business more viable. What is being
underscored is that at a time when some of the other international banks
in the country have left as part of restructuring of their global
operations as well as relatively poor prospects here, the SCG has
significantly increased its presence through the acquisition and launch of
several new products and services with more in the pipeline. The merger
here is not all bad news for some of the SCG skilled employees. For
instance the South Asian giant has recently created a Regional IT
Development Centre in Colombo, which in partnership with the Centre in
Dubai is busy developing a web-based Electronic Banking System (EBS) to be
rolled on to the MESA region from the existing Basic Banking System (BBS).
The Centre in Sri Lanka currently employs 18 staff and with the on-going
development and future work, the number is expected to be increased to 30
in the next 12 months. Mr. Saifi said that
Sri Lanka was chosen for the IT Development since a majority of the Bank's
professionals skilled in software are employed in the Dubai Centre as
well. Furthermore, software development and support for the SCG's credit
card business in the MESA region is being hubbed from Sri Lanka as well.
"The EBS, the on-going restructuring as well as other measures
underway and planned are all aimed at empowering and positioning SCG to
leverage greater growth in Sri Lanka with more efficient and effective
products and services," said Mr. Saifi, who had worked out of Dubai
prior to taking up the new assignment in Sri Lanka. He also shares the
renewed and growing optimism within the local and international business
community of better growth prospects in Sri Lanka under the UNP regime.
"The confidence levels have increased so as the expectations of a
more efficient and effective administration that will support a rapid
growth in business and economic activity," he said. "However
what must be remembered is that if the promised economic rejuvenation and
boom is to take place, Sri Lanka needs to attract a higher level of
foreign direct investments. In this regard the first thing a prospective
investor would want to know is how the existing large multinationals and
global brands are faring in Sri Lanka or what they expect. “Simply they may
even ask their bankers for a view,” Mr. Saifi said. His comments suggest
that it was important that the new Government must ensure that the
interests of existing foreign investors and global players are safeguarded
who in turn would be the credible spokespersons globally for Sri Lanka.
Despite the small contribution regionally, SCG is definitely looking more
long-term in Sri Lanka than before as it believes there is a huge growth
potential coupled with the fact that the tiny island nation has a
sophisticated market and growing per capita income level compared with the
rest of South Asia. The focus will continue to be strengthening SCG's
consumer business especially in the areas of credit card and consumer
loans along with corporate finance and Treasury operations. "We see vast growth potential. People are ready to spend provided the capacity is there. High inflation is a barrier in any market coupled with unfavourable tax structures. The issue of high interest rates must also be addressed sooner than later along with greater spending on infrastructure, both economic and social," he said. Mr. Saifi said that the SCG is looking forward to working closely with the new Government in its development plans and actions. In the past the Bank has been involved in debt financing of major infrastructure projects such as in port development, telecom and gas besides helping local institutions in raising debt in the international market. A recent success was helping Bank of Ceylon raise US $ 80 million at competitive rates. "Rather than offering everything for everyone, the SCG will focus on specific markets or customer segments with products that the Bank has core competence and can add value and keep them happy," Mr. Saifi added.
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