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Strategic Plan for Seylan Bank PLC. 2013-2018

BSc in Business Management (Special)-UGC Degree

13F2

Strategic Management

Group Assignment

Productivity & Management Development Division

NSBM

1

Group Members

D.G.L.R DE SILVA BSC-UGC-MGT-1315-319

J.H.M.G.C JAYAPATHMA BSC-UGC-MGT-1315-221

R.G.A.C ARIYARATHNA BSC-UGC-MGT-1315-182

M.M.S.P BANDARA BSC-UGC-MGT-1315-189

W.D.M FERNANDO BSC-UGC-MGT-1315-077

M.H.MOHAMMED BSC-UGC-MGT-1315-240

M.M.N.L BANDARA BSC-UGC-MGT-1315-188

U.M.D.C FERNANDO BSC-UGC-MGT-1315-206

2

Preface

We are extremely happy to produce this report regarding the strategic plan of Seylan

Bank. In our endeavor we have mainly taken the PESTEL and SWOT Analysis types of

environment analysis, the strategic group mapping, and compared with similar other

banks in Sri Lanka and we have developed a Strategic plan for Seylan Bank for the next

five years. And through that we have compiled this report.

The main idea of doing this project is to orchestrate a Strategic Plan for Seylan Bank

from the year 2013 to 2018. The strategic report includes ratio analysis and various

other research and market share nucleuses and there growth prospective in the coming

years after their almost Bankrupt situation few years ago. We have collected data from

their Annual Reports and online and utilized that Data to transform into meaningful

information, and then implemented various conceptual and theoretical methodologies.

In doing so we able to identify various factors and culminate that into the report.

When going through this report you could see the different ways & methodologies, such

as PESTEL analysis, SWOT analysis, Strategic Group Mapping, while identifying the

geographical localities, quality and to what extent it has been successful in this project.

And also the constraints of the project are stated as well.

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Acknowledgement

We would like to gratefully acknowledge the contributions of Mr. Kolitha

Ranawaka our Strategic Management Module Lecturer for his guidance &

helpfulness in preparation of this report as a fulfillment for our Strategic

Management Module Assignment.

With the consistent support of our team members Mr. Gihan Jayapathma &

Mr. M.H.Mohammed gathering of the Data, providing the Data regarding Seylan

Bank, Research and formulating was of utmost importance as it helped to

formulate the major parts of the Strategic Plan.

Priyanwada, Shani, Nishan, Asith and Chinthaka contributed in numerous ways

that they could with their technical expertise and last but not the least the

Anchorman Mr. Lalindra De Silva.

I would like to gratefully acknowledge the outstanding contributions of Lalindra

De Silva & Gihan Jayapathma. Were it not for their outstanding support &

creative contributions to this project, it would not be the success that it is.

“Thank you.”

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Executive Summary

This report emphasis on how Seylan Bank, who nearly when into solvency and

Bankruptuncy and within the span of three years how it stood up consolidated its

position in the competitive Sri Lankan Banking arena, and is now in the process of

growth through Strategic Plans that helped the Bank when they had their backs to the

wall and by collecting data, analyzing and implementing appropriate suggestions’ and

recommendations.

We foresee tremendous opportunity for growth as our nation overcomes the challenges

posed by the 30-year long war and embraces the opportunities that peace and stability

has paved the way for. While the external environment would remain challenging due to

global economic conditions, every player would have to adapt and evolve to stay

competitive and profitable. The banking sector which has remained strong and resilient

in adversity will have a key role to play as Sri Lanka completes its remarkable journey of

recovery and reconciliation and marches towards the milestone of US$ 4,000 per capita

income.

The task before us is now to advance from our phase of consolidation to a phase of

growth. We shall do so by leveraging our strengths further while enhancing areas such as

customer service and staff training and development. Corporate banking, Trade finance

an Treasury units will play a more vibrant role and we will develop an even more

focused approach towards SME, retail and premier banking functions. The Bank plans to

grow the branch network at the same pace as in 2012.

Strategic locations have been identified to open up branches on a selective basis.

Infrastructure development and upgrading of facilities will continue at a pace with

existing branches made bigger, better and more customer friendly. Alternate channels

such as Internet and SMS banking will also be further improved. We have been a very

popular bank among our expatriate community who regularly remit their hard earned

money to their kith and kin through us reaping the rewards of many direct and indirect

benefits we offer. We aim to further strengthen our offerings in the remittance market

while expanding the number of employees and agents representing us in the relevant

markets. We have formulated a comprehensive new product development strategy and a

number of products have been identified for upgrading in addition to new products to

be launched with numerous value additions to our current and potential customers.

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We have also set our sights on reducing the NPL ratio to a single digit by end 2013

through rehabilitating troubled loans and through effective recovery strategies.

Capital is increasingly becoming a scarce commodity and even a limiting factor for the

growth of banks. We will use our product portfolio and staff skills to grow our non-

interest revenue streams. Our IT platform will be strengthened to support the overall

growth and development strategies of the Bank.

Cost containment and cost management will continue to be a priority area. The

debenture issue which was planned for last year was concluded in early 2013, which has

boosted our capital base further. Going forward, a culture of passing capital to more

productive business units will be implemented to ensure its optimal use.

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Content

Group of Members……………………………………………………………………..1

Preface..........................................................................................................................2

Acknowledgement……………………………………………………..........................3

Executive Summary………………………………………………………..…….........4

Seylan Bank Introduction……………………………………………………………7

Background………………………………………………………………………………..8

Methodology………………………………………………………………………………10

Company Profile………………………………………………………………….………11

Swot Analysis Of Seylan Bank………………………………………………..……12

Porter’s Five Forces Model…………………………………………………….…….19

Strategic Group Mapping……………………………………………………......…….22

PESTEL Analysis……………………………………………………………………..…..32

Conclusion……………………………………………………………………………..……43

Recommendations…………………………………………………………….…..…….45

7

Seylan Bank Introduction

This report details the performance review, the divisional performance and the

strategic adopted by the bank to achieve the pre-set goals according to the strategic

plan and the budgets. It also enables to gain a better understanding of the bank while

maintaining the transparency of the information to all their stakeholders. This report is

written, based on the various strategies adopted between 2009-2012 and the success of

these plans. Their theme of last year’s annual report IT WORKS is based on the

strategies adopted from 2009-2012 for readers to understand the significant progress

made by the bank over the said period. We have identified strategic priorities as per the

following scope and detailed in the relevant sections where necessary.

Success strategies and business growth

Expansion of our delivery channels for faster reach

Improved credit quality

Success Strategies and Business Growth

After the change of management in 2009 the bank implemented its 2009-2011 strategic

plan to build customer confidence and address various issues that were prevailing at

that time. Strategic plan 2013-2018 was built on growth, improving of the business

performance, service quality and obtain process efficiency. Such initiatives and

strategies have already shown growth in business and banks profitability as evident in

our 2012 performance. Main strategies adopted, its implementation and the result are

discussed in detail under this report.

Vision-

To be Sri Lanka’s leading financial services provider as recognized by all our

stakeholders.

Mission-

We provide our customers with financial services that meet their needs in terms of

value, pricing, delivery and services.

We will do so through a team of Seylan bankers who are recognized and rewarded for

results orientation.

We will ensure that our efforts translate to meeting the expectations

of our shareholders, whilst always acting as responsible corporate citizens.

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Background

HISTORY

Seylan Bank PLC was founded in 1987 and opened its doors for business on 24th

March 1988,in Colombo Fort,the traditional banking district of Sri Lanka's largest

city. Originally named Seylan Trust Bank Limited,it was designated a Licensed

Commercial Bank and incorporated as a public company with a broad base of

shareholders. From its founding, the new institution was part of the Ceylinco Group

of Companies,a major Sri Lankan conglomerate operating in a wide range of

industries. The goal of the Bank's Founder Chairman, Dr. Lalith Kotelawala, was to

offer retail customers a more welcoming, service-oriented alternative in a banking

culture that was generally perceived to be formal and regimented, even a bit

austere.From the outset, Seylan Bank presented itself as a flexible, customer-

friendly choice, summing-up its promise in a service motto that soon caught the

attention of prospective customers:

'The Bank with a Heart'.

In December 2008, Seylan Bank was confronted by a sudden, unexpected crisis of

public confidence resulted by the crisis evolved around the "Golden Key Credit Card

Company" which is a subsidiary of the Ceylinco Group of companies. With the timely

intervention of the Central Bank of Sri Lanka under the provisions of Section 31 of

the Monetary Law Act, a new board of directors was appointed to manage the bank.

The new board under the Chairmanship of MR. Eastman Narangoda, a veteran of the

banking industry who had previously held the position of General Manager/CEO of

National Savings Bank - a state-owned institution, took the challenge of re

stabilizing the bank and regaining the customer confidence. The effort of the

management and the staff paid dividends in a matter of months and Seylan Bank

PLC rose like a Phoenix from the ashes and reached a mile stone in 2010 by

recording a Profit after tax of LKR 1.2 Billion surpassing the 1 Billion thresholds for

the first time in it's history.

And now this report unfolds the strategic plans that were adopted and to be taken

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Seylan services

International Trade :Seylan Bank Trade Services

Corporate Banking :In our short period of existence

Offshore Banking :Eligibility criteria for opening accounts

Development Banking :A novel idea of introducing a credit card

Pawning services :Seylan Bank now offers you the highest value

within the next five years.

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Methodology

The operational outlook which brought back the Seylan Bank to its current status.

Seylan Bank foresee tremendous opportunity for growth as our nation overcomes the

challenges posed by the 30-year long war and embrace the opportunities that peace and

stability has paved the way for. While the external environment would remain

challenging due to global economic conditions, every player would have to adapt. The

strategic plan which got off the ground in January and Seylan Bank’s adherence to the

key actions identified proved an invaluable asset not only for the success that Seylan

Bank achieved during the year but also in terms of preparing Seylan Bank for further

growth and improvement in the years to come. While the main focus was to improve the

core – business, the objectives multi-fold , including improving overall customer

satisfaction, adding more value to our stakeholders through reinventing the product

portfolio, enhancing internal processes to improve efficiency, strengthening risk

Management processes and further developing the human resources across the board.

The bottom-up process that was followed in the formulation of the strategic plan where

Seylan Bank got the input and support of the staff across the network meant greater

understanding and a singular focus on key initiatives. Seylan Bank have and shall

continue to update the plan through the rest of the period bringing in the learning’s of

what works and what does not and ensure that this will remain a live and meaningful

document that will continue to charter the Bank’s way forward.

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Company Profile

The Seylan bank was formed in the year 1987 to cater to the Banking Industry. The

company's main focus is to be Sri Lanka's leading financial services provider - as

recognized by all their stake holders. The top management consists of eight members

who have a vast knowledge & experience in the Banking Industry. The Board of

Directors are as follows.

CEO – Mr. D.G.L.R DE SILVA

BSc Business Management (Harvard),

MSc Marketing Management (Cambridge)

PHD Economics (Oxford), CFA

Managing Director – Mr. J.H.M.G.C JAYAPATHMA BSc Business Management (NIBM), MBA Project Management (Moratuwa)

MSc Actuarial Science (Cambridge), ACCA, CIMA, AAT Finance Director - Mr. M.H.MOHAMMED

BSc Finance Management (PLYMOUTH),

MBA Finance & Accounting (Colombo), ACCA,CIMA

Executive Director – Mr. M.M.N.L.BANDARA

BSc. Accounting (Sp) (First Class Honors) (Colombo),

MSc. Business Finance (Harvard) CIMA, AAT,

Executive Director - Ms. R.G.A.C. ARIYARATHNA

BSc in Business Management (Special) Kelaniya,

CIMA, CIM

Non- Executive Director – Ms. W.D.M. FERNANDO

AAT,CMA,CIMA,ACCA,CFA

Non- Executive Director- Mr. U.M.D.C FERNANDO

BSc. in Banking & Finance

AAT,CMA,CIMA,ACCA,CFA,

FMCC, CGMA

Director – Ms. M.M.S.P BANDARA

BSc. Banking & Finance (Special) 1st Class Hon.

MSc. Banking & International Finance.

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SWOT Analysis of Seylan Bank

The SWOT analysis is a tool which can be used to highlight the strengths, weaknesses

and opportunities, threats of Seylan Bank. Analyzing the strengths of our product will

help us to find out any business opportunities that will enable our company to have a

stronger market position. Also being aware of any weaknesses that exist in our product

will help us to minimize any threats that may reduce the demand for the product.

Therefore SWOT analysis proves to be a useful tool that helps to carve business

strategies in order to keep a sustainable share in the market. While the strengths and

weaknesses are affected by factors internal to the company, the opportunities and

threats are related to the external environment.

Successful marketing strategies emerge from a comprehensive situation audit. The

marketing strategies are evaluated from both external factors opportunities & threats

and internal factors strength & weakness. On the other hand, the information on

competitive activities and customers collected through market intelligence which helps

to maximize the fit between the organization’s capabilities & future opportunities. Firms

which successfully evaluate market intelligence will enjoy financial performance.

SWOT has been used to evaluate the firm’s strategic situation in the competitive

marketplace. The SWOT analysis on firm’s marketing situation is determined through

internal & external strategic analysis which covers the firm’s traits (strengths &

weakness) and competitive factors (opportunities & threats). Therefore a SWOT

analysis is essential for effective strategic marketing. The environmental factor

opportunities & threats are uncontrollable whereas the internal factors strength &

weakness are seen as controllable for the organization.

The comprehensive SWOT profile of Seylan Bank provides an in-depth strategic analysis

of the bank’s business and operations. The analysis will give the clear idea about

company’s key strength & weakness and the potential opportunities & threats. This

helps to formulate the strategies and to better understand the competitors, partners &

customers.

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The above diagram shows the SWOT analysis of Seylan Bank. It shows the strengths,

weaknesses, opportunities and threats.

PO

SITI

VE

NEG

ATI

TIV

E

INTERNAL

EXTERNAL

STRENGTHS

Seylan Bank’s core strength is

its people who united and

managed to overcome from

crises.

_

WEAKNESSES

- Overtrading

-Bank’s undue expansion in

limited capital

OPPORTUNITIES

-Independent identity with a

completely new board helps to

boost the confidence of

management as well as

employees

THREATS

-Threat of recession contains

global banking failures

-Liquidity risk

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Seylan Bank SWOT ANALYSIS: Strengths - Weaknesses & Opportunities –

Threats

STRENGTHS (Internal) WEAKNESSES (Internal)

1) Seylan Bank’s core strength is its people

who are united to manage any overcome

from crisis.

01) Seylan Bank’s large innovative services

provided to the customers

02) Offered high interest rates & additional

bonus on minimum deposit amount.

03) Expand its reach to rural areas

04) Highly diversified customers’ portfolio

05) Diversification in their operation in

banking including insurance investment

banking assets management and increase

the facility for mobile & internet banking.

06) Present unstable market condition

increases their profit margin than

previous year.

07) Have succession plan through talent

management team.

08) Increases the earning per share than

previous year.

09) Increases shareholders fund and earning.

10) Bank have a wider product line.

11) Network of branches spread all over the

country and provide easy access to entire

spectrum of customer.

12) Improve the access to financial service for

customer.

13) Enhance higher ATM coverage in the

country and newly open the ATM in rural

area.

14) Done the CSR activities than other

competitors.

01) Overtrading

02) Bank’s undue expansion in

limited capital

03) Bank is not aligned with the

current customer needs &

demands.

04) Sizeable amount of Non

Performing Loans.

05) Poor asset management&

capital inadequacy

06) High operation cost

07) Inadequate deposit

mobilization effort

08) High level of nonperforming

asset.

09) Financial exclusion

10) Weaker brand image in the

market (problem of 2009)

11) Complex and nonproductive

sector organizational

structure

12) Credit to non-productive

activity

13) Inadequate access to global

financial system

14) Structural weakness such as

a fragment industry

structure, restriction on

capital availability and

development lack of

industrial support

institutional

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OPPORTUNITIES (External) THREATS (External)

01) Independent identity with a completely

new board helps to boost the confidence

of management as well as employees

02) Deliver higher financial value to its

customers & investors

03) Highly market focused

04) Strategic initiatives such as domestic &

international business opportunities

05) Empower disadvantaged group

06) Increase the profitability by accessing

international financial market ( bank

have only one blancher in Bangladesh for

internationally )

07) Expand the their business in product wise

using related or unrelated diversification

achieve the competitive

advantage.(minimize the risk)

08) Stronger productivity growth

09) Opportunities to access foreign market

01) Threat of recession contains

global banking failures

02) The intervention of

monetary board is the

broader threat to economic

equilibrium.

03) Liquidity risk

04) Competitors bank in the

market

05) Higher rules and regulation

are introduce by the

government ( establish new

act & low)

06) External party have negative

attitude about the bank(

bank corruption in seylan )

07) Weak brand name

Strengths:

Inventor in SMS banking service in Sri Lanka. Seylan Bank PLC was the first bank in Sri Lanka who introduced SMS banking to its

customers in year 2004. This system is connected to almost all Telecommunication’s

operating in the country. Being the first member of experiencing the SMS banking

service island wide; strengthening the capabilities to face future challenges & enhance

the existing services. It facilitates the customization to manage customer’s accounts by

the SMS push and pull technology. With this feature customers have the capability of

transferring money between their own accounts, requesting the Bank for many ad hoc

functions such as cheque books, pay utility bills, check credit card details and many

more day-to-day banking functions. SMS alert facility was introduced in year 2011 as a

new marketing drive, promoting the SMS facility as a fake detection method for

cardholders’ transactions. Further; the Bank is currently improving this technology with

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a view to facilitate more enhanced security features to provide a more advanced

banking functions based on market dynamics and collated consumer inputs.

Inventor in Phone banking service in Sri Lanka Seylan Bank PLC is the inventor of multilingual phone banking product in Sri Lanka was

launched by the Bank in 1998 to its customers under the flagship “Seylaphone”. It has

become a famous way for customers to carry out basic banking using any fixed-line or a

mobile telephone. The bank is delivering the services to customers free of charge for life

time. Account holders of the Bank could register and use this facility in their preferred

language Sinhala, Tamil or English. This facility has also been extended to all expatriates

living abroad to maintain and monitor their accounts from anywhere in the world.

Weaknesses:

Lower Staff strength Seylan bank PLC consists with total staff of 3,061 Island-wide which is the lowest among

rivals in the industry. Lack of human resource may lead to poor performance of the

bank & customer turnover will be increase.

Poor Branch network

Seylan bank PLC has 147 branches Island wide which is also lower than the key rivals.

Other than that; some of key rivals consist with overseas banking services while

establishing branches in abroad.

Poor ATM network

Automatic Teller Machine (ATM) is a computerized telecommunications device that

enables the clients of a financial institution to perform financial transactions without

the need for a cashier, human clerk or bank teller. It improves customer convenience in

banking services. In this case Seylan bank PLC having the lack of essential resource to

gain more customers than rivals.

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Poor Return On Assets (ROA %)

Return on assets gives an indication of the capital strength of the company. When

consider the ROA of Seylan bank PLC (1.17%) ; which is comparatively low than key

rivals. This will impact on profitability as the earning on assets is low.

Poor Return On Equity (ROE %)

Return on equity (ROE) measures a company’s efficiency at generating profits from

every unit of shareholders' equity. ROEs between 15% and 20% are generally

considered good. In this case Seylan Bank PLC having 11.24% ROE which is lower than

the key rivals as well as the standard.

Poor product portfolio

Even Seylan bank PLC providing corporate, personal, treasury & international banking

services; their product portfolio is poor among those services than rivals. Some of the

key rivals focusing on providing banking facilities to small & medium enterprises (SME)

targeting different market niches while Seylan bank having narrow common markets.

Opportunities:

Seylan Bank PLC is having a small number of staff compared to other financial

rival institutes. It’s an ease for the management to control and monitor the staff.

And also it’s easy to provide training, research and development to get the best

potential outcome of them through increasing the efficiency and productivity.

Seylan Bank PLC has an up to date technological knowhow which efficient the

operations within the bank. Since they are having a reduced supervision costs

compared to other financial rival institutes, they can focus on new banking

opportunities by allocating those saved funds.

Knowledgeable and trainable staff compared to Government Banks.

Threats :

Commercial bank has placed business promotions officers overseas in Jordan

Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates with the

objective of promoting the banks e-exchange facility among the Sri Lankan

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expatriates and to canvass new accounts while promoting various other types of

products.

Banks open from 9 am to 1.30pm on bank holidays.

Commercial Bank providing services in banking centers at Arpico Super Centers:

Providing holiday banking centers, Minicom – Banking centers at Cargills Food

City super Markets and several service points.

Rival Banks have gained a larger provision of market capitalization.

Key rivals capturing the global attention.

Unavailability of skilled and know ledged expertise.

19

Porter’s Five Forces Model

Michael E. Porter who introduced Porter’s Five Force Model in 1979 Harvard Business

School. The Porter’s Five Forces Model show how the competitive landscape in an

industry is impacted by five forces. Industry analysis and business strategy

development is the main framework of it. These forces are firms in other industries

offering substitute, Competitive Rivalry within an organization, bargaining power of

suppliers, bargaining power of Buyers, and thereat of new entrants. Industry is

favorable entry when five forces are higher. Banking industries are the most

competitive.

The Seylan Bank to get an understanding about the profitability and industry’s

competition. Not only that but also Porter’s five factor model helps to enhance some

activities done by Seylan bank.

They are managing the capital, assets and liabilities, Interest rate risk, liquidity, asset

quality, profitability. With the help of this model Seylan bank can make strategies such

as focus on individual customers and smaller businesses, providing banking services

such as personal loans and deposits, checking accounts, clearing, debit and credit cards,

leases, mortgages and ATM networks to win the market and its survival.

20

Competitive Rivalry within an Industry

In the traditional economic model rival firms get zero profit. However firms are not

reasonable price. Banks strive for a competitive advantage over their rivals. Most

industries, the intensity of competitive rivalry are the major competitiveness of the

industry. There are 6 factors favor price competitive ;Market structure, No product

differentiation , The nature of the sales process, large, secretive & lumpy, capacity

utilization, consumers. According to the banking industry analysis, there are 5

competitors in the market for Seylan Bank. These are HNB,BOC Peoples’Bank, Sampath

Bank, Commercial Bank. The banking industries are highly competitive because

everyone who need banking services for their financial activities. Every banking sector

is in a race to see who can offer both the best & fastest services. According to our

analysis among the rivals, commercial Bank takes higher place in the industry. Because

of the taking highly risk projects.

Threat of Substitutes Products

There are plenty of substitutes in the banking industry. Seylan bank offer higher rates,

taking deposits and lending money & non-banking financial services. Other companies

offer similar services insurance, mutual funds, or fix income securities. According to

deposit money of the Seylan bank have more competition with commercial bank and

BOC.

Threat of New Entrance

Many Companies enter the market as new comers. It is very higher to new entrance. The

banking industry has undergone a consolidation in which major banks seek to serve all

of a customer’s financial needs under their roof. This consolidation furthers the role of

trust as a barrier to entry for new banks looking to compete with major banks, as

consumer are more likely to allow one bank to hold all their accounts and service their

financial needs.

Ultimately the barriers to entry are relatively low for the banking industry. While it is

nearly impossible for new banks to enter the industry offering the trust and full range of

services as a major bank, it is fairly easy to open up a smaller bank operating on the

regional level.

21

Banking Industries focus on Services Oriented. One person who cannot come along and

to start a new bank. Seylan bank use online services, use pay bill from internet.

Economies of scale and scope, limited access to essential resources or

Channels of distribution, patents, need to establish brand identity, high capital costs,

licencing costs.

Bargaining Power of Suppliers

According to the banking sectors Seylan Bank have no big threat from suppliers. During

right liquidity periods suppliers of capital will act continually. Capital is the primary

resource on any bank and there are four major suppliers (various other suppliers [like

fees] contribute to a lesser degree) of capital in the industry.

1. Customer deposits, 2. Loans, 3. baked securities. 4. Loans from other financial

institutions. By utilizing these four major suppliers, the bank can be sure that they have

the necessary resources required to service their customers' borrowing needs while

maintaining enough capital to meet withdrawal expectations.

The power of the suppliers is largely based on the market, their power is often

considered to fluctuate between medium to high.

Bargaining Power of Customers.

One major factor affecting the power of buyers is relatively high switching costs. If a

person takes loan, credit card, deposit A/C and mutual funds in a bank it can be

extremely tough that person to switch to another bank. To try and convince customers

to switch to their bank they will often times lower the price of switching, though most

people still prefer to stick with their current bank. The internet has greatly increased

the power of the consumer in the banking industry. The internet has greatly increased

the ease and reduced the cost for consumers to compare the prices of opening/holding

accounts as well as the rates offered at various banks.

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Comparative Market Positions of Selected Banking Industries:

2009

Medium

High

Low

Low Medium High

Per

form

ance

Geographical Area

Commercial

Bank

Sampath Bank

Peoples’ Bank

Seylan

BOC

HNB

23

2010

Medium

High

Low

Low Medium High

Per

form

ance

Geographical Area

Commercial

Bank

Peoples’ Bank

BOC

HNB

Seylan

Sampath Bank

24

2011

Medium

High

Low

Low Medium High

P

erfo

rman

ce

Geographical Location

Commercial

Bank

HNB

Seylan

BOC

Sampath Bank

Peoples’ Bank

25

2012

MMedium

Highgh

Low

Low Medium High

Per

form

ance

Geographical Area

Commercial

Bank

HNB

Seylan

BOC

Peoples’ Bank

Sampath Bank

26

Comparative Market Positions of Selected Banking Industries:

2013

Medium

High

Low

Low Medium High

P

erfo

rman

ce

Geographical Area

Commercial

Bank

Sampath Bank

Peoples’ Bank

BOC

HNB Seylan Bank

27

2014

Medium

High

Low

Low Medium High

P

erfo

rman

ce

Geographical Area

Commercial

Bank

Peoples’ Bank

BOC

HNB

Seylan

Sampath Bank

28

2015

Medium

High

Low

Low Medium High

P

erfo

rman

ce

Geographical Area

HNB

Seylan

BOC

Sampath Bank

Peoples’ Bank

Commercial

Bank

29

2016

Medium

High

Low

Low Medium High

P

rP

erfo

rman

ce

Geographical Area

HNB

Seylan

BOC

Peoples’ Bank

Sampath Bank

Commercial

Bank

30

2017

HNB

Seylan

BOC

Peoples’ Bank

Sampath Bank

P

erfo

rman

ce

Low Medium High

Geographical Area

High

Medium

Low

Commercial

Bank

31

2018

HNB

Seylan

BOC

Peoples’ Bank

Sampath Bank

Commercial

Bank

High

Medium

Low

P

erfo

rman

ce

Low Medium High

Geographical Area

32

PESTEL Analysis

The Macro Environment

A PESTEL Analysis is undertaken to understand the dynamics of the external

environment, which the film industry operates in. While these factors are out of the

industry’s control, the industry needs to be aware of them to adapt itself to avoid the

threats and exploit the opportunities in the environment.

The External

Environment

Impact on The Film Industry

Political

Factors

1. The political

environment is

considerably stabilized

and Sri Lanka is united

under one Government

after a span of 25 years.

2. Government has

lessened the degree of

Intervention in the

economy.

3. It’s the Government’s

responsibility to

maintain a good global

reputation for foreign

Investments and

developments in the

financial services.

1. A stabilized political system is good news

for the Financial & Banking Industry.

Explore opportunities presented by the

upsurge in the demand for trade finance for

investment in post-conflict development in

the North and the East.

2. In the Banking Industry they are more

confident of planning long term strategies.

The opening up of North and East has given

the Seylan Bank the attractive opportunity

of conquering that virgin market and of

stabilizing their industry position

throughout the island.

3.The loosened restrictions on the economy

allow the Seylan Bank to take more

decisions that are independent.

- Foreign exchange coming in to the country.

33

Political

Factors

4.Government imposes

tough rules and

regulations and charge.

-4.To create innovative features as well as

facilitating of physical resources.

-as a result, cost cutting measures have to

be adopted.

- Continue with Bank’s commitment to

innovation and product development which

will improve service level and enhance

market share.

Economic

Factors

1. A lot of development

projects are going on

across the country.

2. Lower interest rates

have lured international

players to the market.

3. Recovery from the

economic downturn.

4.Crisis period has not

yet settled down.

-1.The development projects taking place

throughout most rural areas have been

creating a steady flow of money in the

usually laid back markets. There is plenty

of opportunity for the bank industry to

strengthen their profits by concentrating

on marketing campaigns in these areas.

2. Maximize foreign exchange gains from

increased trade volumes.

3. Capitalize on market arbitrageurs in

forex and equity trading.

4.Through reinventing the product

portfolio, enhancing internal processes to

improve efficiency, strengthening risk

management processes and further

developing the HR.

34

Economic

Factors

5.Government impose

tough rules and

regulations regarding

finances.

6. One of the best stock

markets in the world.

5. Increase capital gains from government

securities trading with the downtrend in

rupee interest rates.

- Continue with Bank’s commitment to

innovation and product development

which will improve service level and

enhance market share.

6.The lucrative economy (bull market)

prevailing in Sri Lanka has been luring

investors. This poses threats as well as

opportunities to the bank industry as more

financially stronger companies enter and

compete for a share of the bank industry.

35

Socio-cultural

Factors

Socio-cultural

Factors

1. Increasing ageing

population

2. Lifestyles are modern

and fast paced.

3. Increase number of

higher education

institutes.

4. Increased Tamil

population.

5. Many Sri Lankans are

migrating back to Sri

Lanka.

6. Tourism has taken a

sharp rise in the

country.

7.Women are employed

more than ever.

8.The young generation

gives priority to work,

and marriage is

postponed.

1. Bank Industry has the opportunity to

venture into new Segments and fill up a

gap in the market for the elderly

population.

-Introduction of retired pension schemes.

2. Marketing via social media, launching

Seylan

Bank ‘s Facebook fan page and enhanced

fan base to 20,000 in two months from date

of launch.

3. granting student loans for higher

education.

- focused on existing product development

based on existing segments in order to add

more value and enhance the relationship

through co-creation initiatives.

4.A population with a new taste palette too

is on the rise, giving the bank industry a

reason to widen their production portfolio.

5. The return of Sri Lankan migrants back

to the country gives the Bank Industry a

chance to expand their customer base.

6. The tourist boom can be made handy to

market the Seylan Bank value added

services.

7.Research shows women work more than

men do, thus the trend of working women

is positive for the industry.

8.Developed bundling of products and

services and simplified processes to benefit

36

the internal and external customers(young

generation).

Technological

Factors

Technological

Fact

1.Bankers have been

introducing latest

technology into the Sri

Lankan Banking

Industry during the last

few months.

2. Technology is being

obsolete at a mind-

blowing rate.

3.Automation and

improvements

4.Enhance IT-based

solutions to deliver

superior benefits to

internal and external

customers.

5.Automation and

improvements

1.The continuous introduction of modern

technology in the industry facilitates the

Bank’s to keep a breast with the

international Banks.

- Trends and operations.

2. The Bank Industry owes it for technology

for their undisputed standards of quality,

operations and services.

3.All identified possible operation

processes were transferred to centralized

services for specialized support to ensure

efficiency and cost savings.

4.the funds transfer process was

automated, enabling business units to

make better informed decisions.

-Manny HR processes that were hitherto

manual were automated, among them staff

appraisal, training etc….

5-a.Data from the bank’s separate systems,

consolidated in a single “client view”.

37

Technological

Fact

Technological

Factors ors

5.Automation and

improvements

- 5-b.Internal development team rolled out

comprehensive remittances module,

cheque return management module and

some other modules to enhance efficiency

of the branches.

-5-c.Testing of the core-banking system,

subsystems and all the external interfaces

was completed during the latter part of

year 2012.

5-d. IT Steering Committee was further

improved to accommodate Sub-

committees of the various business units of

the Bank.

-5-e.Bank’s card management system

platform upgraded to provide the

infrastructural facilities for the Europay,

MasterCard and visa(EMV) upgrade.

5-f. The IT Department in conjunction with

Misys developed and parameterized the

module which automated the downgrading

of non-performing current accounts in

2012.

5-g. Several Management Systems

improved to facilitate user- friendly

banking, such as cheque imaging truncation

system, SMS banking, internet Banking and

pawning systems.

38

5-h. improvement of branch IT

infrastructure including expansion of its

services to newly open branches and ATMs.

5-i. Structured Systems Training

Programme for staff to develop their skills

and knowledge.

Ecological

Factors

Ecological

Factors

1.Concern for the

protection of

environment has been

on the rise.

(Environmental

Management Systems

(EMS))

2.Banking operations

impacts on the

environment.

3.Adopting green

initiatives.

1. The demand for saving can both

increase and decrease during times of

crises. Relief support groups tends to

finance for a cause to fund the flood

victims. And when victims are unable to go

to banks to withdraw money clearly, the

demand in the area significantly goes

down.

2.In the office complex, work consumes

large amounts of energy and natural

resources. They generate waste and sound

pollution.

3. In a “green” initiative , the printing of

salary slip was discontinued and customers

also enjoy the option of getting their

monthly statements online.

39

Legal Factors

Legal Factors

-. Compliance and legal

regulations for Bankers.

- Disability

Discrimination

Legislation.

-Social discretion and

cultural values, morals,

ethics, strict laws and

safety regulations.

-. Bank Act of Sri Lanka.

-.Regulations to help

banks carry out their

services and operations.

-.Approve and oversee

the Bank’s strategic

objectives and

corporate values and

ensure that these are

communicated

throughout the bank.

-. Identify the principal

risks and ensure

implementation of

appropriate systems to

manage the risks

prudently.

- Legal factors have an effect on both

service and Employment operations.

Systems have to regulatory demands and

the bank industry would have to bear a

considerable cost if changing the usual way

of Processes.

-. The demand for quality standards gives

only a few banks a competitive advantage

as they already adhere to highest

standards.

-International recognition can be gained by

through high quality banking procedures

done in the highest possible way.

-. It helps towards the up liftmen of the

industry.

-. Protects the bankers. Legal Entity Act.

-.The Board approved the 4 – year strategic

plan 2012/2015 on 12th December 2011

and communicated the new strategic

objectives and corporate values to the staff.

The timely implementation of strategies

was monitored through frequent reviews at

Board Meetings.

-.The Board has delegated these

responsibilities to its Integrated Risk

Management Sub-committee. The

Committee ensures that the Bank’s Chief

Risk Officer/Risk Unit identifies principal

40

-. Approve

implementation of a

policy of communication

with all stakeholders,

including depositors,

creditors, shareholders

and borrowers.

-Review the adequacy

and the integrity of the

Bank’s internal control

systems and

management

information systems.

-. Identify and designate

Key Management

Personnel, as defined in

the International

Accounting Standards,

who are in a position to:

i. significantly influence

policy;

ii. direct activities; and

iii. exercise control over

business activities,

operations and risk

management.

-Define the areas of authority and key responsibilities for the Board of Directors themselves and for the Key Management Personnel.

risks and puts in place polices and

guidelines to be reviewed and approved by

the Committee. Systems put in place were

being tested by the Risk Unit.

-. A Stakeholder Engagement Policy has been approved, implemented and monitored at Board level.

- Adequacy and integrity of the Bank’s

internal control systems and management

information systems were reviewed by the

Board Audit Committee. The decisions

and/or actions taken are submitted for

Board’s information and/or action (if

deemed necessary).

-.The Board has identified Key Management

Personnel who are in a position to

influence and exercise control as

mentioned herein and deemed as ‘related

parties’ in order that necessary steps could

be taken to abide by/comply with the

relevant Banking Act Directions [Ref: 3 (7)

of this report] and Sri Lanka Accounting

Standards disclosures on related party

transactions. The KMPs were reviewed and

approved by the Board during the year.

-.The key responsibilities of key management personnel are defined in their job responsibilities, whilst the Directors derive their responsibilities from the regulations and directions, mainly, the Banking Act Directions.

41

- Ensure that there is appropriate oversight of the affairs of the Bank by Key Management Personnel, that is consistent with Board policy.

- .Periodically assess the effectiveness of the Board of Directors’ own governance practices, including:

i. the selection, nomination and election of Directors and Key Management Personnel; ii. the management of conflicts of interests; and iii. the determination of weaknesses and implementation of changes where necessary. -.Ensure that the Bank has an appropriate succession plan for Key Management Personnel.

-.Meet regularly, on a needs basis, with the Key Management Personnel to review policies, establish communication lines and monitor progress towards corporate objectives.

- . Communication of Board approved policies and decisions are conveyed through Board minute - - -- - extracts and the appropriate follow-up actions and reports/decisions of the relevant Key Management Personnel confirms this

- Effectiveness of the Board’s own governance practices including i, ii and iii specified herein is ensured. Evaluation of the Board Performance including all governance practices are assessed by the Directors individually and collectively discussed/reviewed by the Board annually

- . The appropriate succession plan for Key Management Personnel is reviewed by the CEO and the HR Division submits such succession plan to the Board’s Nomination Committee for its review and/or concurrence annually or as deemed necessary. -.Key Management Personnel are co-opted and/or attend by invitation to the Board Sub-committees. Minutes of the Subcommittees and action plans arising out of same are tabled at Board Meetings for the Board’s review and/or follow up. Key Management Personnel are also called by the Board when demand required explaining matters relating to their respective functions.

42

- Considering the above PESTLE analysis, it is safe to say that the current situation

of the external environment is favorable to the Bank industry as well as Seylan

Bank.

- But, all these positive factors (stabilized political situation, potential of the

economy, advances in technology and the expansion of customer base) reflects

that competitors too will be lured to do commercial operations.

- Although the bank industry is faced with opportunities to exploit, pressures from

competitors will be inevitable.

- . Understand the regulatory environment and ensure that the Bank maintains an effective relationship with regulators.

- . The Board is updated of the changes in the regulatory environment and maintains an effective relationship with regulators. The process is managed by the Bank’s Compliance Officer.

43

Conclusion

In conclusion we can safely say that Seylan Bank has stepped into an new era with its

current asset base and further growth could be anticipated.

And also Seylan Bank’s core strength is its people who are united to manage and

overcome any form of crisis. Seylan Bank’s long term innovative services provided to

customers have reap benefits and yielded results in favor of the bank.

Offering of high interest rates & additional bonus on minimum deposit amount.

Expanding its reach to rural areas .Highly diversified customers’ portfolio,

Diversification in their operation in banking including insurance, investment banking

assets management and increase the facility for mobile & internet banking.

Developing a strategic vision of where the company needs to head and what its future

products/ market/ customer/ technology focus. This managerial step provides long

term direction, infuses the organization with a sense of purposeful action and

communicates management’s aspirations to stakeholders.

Setting objectives to spell out for the company how much of what kind of performance

is expected and by when. Objectives need to require a significant amount of

organizational stretch.

Present unstable market condition increases their profit margin than previous year.

Having the succession plan through talent management team. Increasing the earning

per share than previous year. Increasing shareholders funds and earnings. Bank having

a wider product line. Network of branches spread all over the country and provide easy

access to entire spectrum of customers. Improving the access to financial service for

customers and clients. Enhance higher ATM coverage in the country and newly open the

ATM in rural areas. Enhancing the CSR activities than other competitors and creating a

reputation, goodwill and adding value to the Brand of Seylan Bank.

Crafting a strategy to achieve the objectives and move the company along the strategic

course the management has charted. Crafting strategy is concerned principally with

forming responses to changes in under way in the external environment, devising

competitive moves and market approaches aimed at producing sustainable competitive

advantages, building competitively valuable competencies and capabilities.

44

By practically crafting a strategy for Seylan Bank PLC we experienced that, a company’s

strategic vision, objectives and strategy constitute a strategic plan for coping with

industry and competitive conditions, out competing rivals and addressing the

challenges and issues that stand as obstacles to the company’s success.

45

Recommendations

In going forward with the Strategic Plan for the next five years below recommendations

could be identified and implemented in phases to enhance the capacity of the Bank.

Independent identity with a completely new board helps to boost the confidence of

management as well as employees. Delivering higher financial value to its customers &

investors. Highly market focused Strategic initiatives such as domestic & international

business opportunities, Empower disadvantaged group Increase the profitability by

accessing international financial market ( bank have only one balancer in Bangladesh

for internationally ) Expand their business in product wise using related or unrelated

diversification, achieve the competitive advantage.(minimize the risk)Stronger

productivity growth Opportunities to access foreign market .

Focusing to provide banking services to extend the product portfolio such as

introducing services to Small & Medium Enterprises (SME) to encourage the existing

entrepreneurs as well as new comer to the industry.

Establish small bank units in school to encourage minors’ savings.

Improve the existing innovative technologies that already have with the bank such as SMS banking & Phone banking.

Expand the banking services in overseas to gain global sales in Asia.

Provide customizable credit cards to different types of account holders according to their preferences.

46

References 1. Seylan Bank, Annual report (2012)

2. Peoples Bank, Annual report (2012)

3. Bank of Ceylon, Annual report (2012)

4. Hatton National Bank, Annual report (2012)

5. Commercial Bank, Annual report (2012)

6. Sampath Bank, Annual report (2012)

7. Thompson A. Strickland A J. Gamble,J.(2009)Crafting &Executing strategy. 16th edition.

8. Seylan Bank official website (2012).Available from: www.eseylan.com

9. Commercial Bank official website (2012).Available from: www.combank.net

10. Sampath Bank official website (2012). Available from: www.sampath.lk

11. Peoples’ Bank official website (2012). Available from: www.peoplesbank.lk

12. Hatton national bank official website (2012). Available from: www.hnb.net

13. Bank of Ceylon official website (2012). Available from: www.boc.lk

14. Central Bank of Sri Lanka (2012).Available from: www.cbsl.gov.lk

47