Commercial Bank steps up investment banking activities

The Commercial Bank of Ceylon has decided to increase its involvement in the sphere of investment banking, through its operational unit specialised in such activities, titled Commercial Bank Investment Banking.

At the outset, Commercial Bank Investment Banking focused on innovative financial instrument structures such as Securitisations, Project Loans and Syndicated Term Loans. The main emphasis was on structuring and in investing in these deals. Commercial Bank Investment Banking also engages in structuring, management and underwriting of Initial Public Offerings (IPOs), functioning as Bankers to the Issue for IPOs, and structuring and management of private placements of shares and debentures.

The new revenue generating products established by Commercial Bank Investment Banking include Margin Trading, which involves providing finance for the purchase of listed shares by customers, as well as Custodian and Escrow Services, which revolves around the Bank facilitating customer transactions by acting as an independent facilitator.

General corporate advisory services are also provided by Commercial Bank Investment Banking in areas such as Mergers and Acquisitions, Corporate Restructurings and Management Buyouts.

In this interview, Commercial Bank’s Assistant General Manager – Corporate & Investment Banking, Naveen Sooriyarachchi elaborates on the services offered by Commercial Bank Investment Banking.

Excerpts:

What is the involvement of Commercial Bank in investment banking?

Commercial Bank is presently the largest privately owned bank in the country and also has the highest market capitalisation among listed banks in Sri Lanka. The main strengths of the Bank which were originally in corporate and trade finance have now been augmented by a significant retail business which contributes a substantial share of revenue and profits, as well as by a large presence in Bangladesh.

The main reason for the Bank entering the Corporate Finance space initially, and in a more gradual and focused manner the Investment Banking space, has been to expand the range of products and services offered over and above standard commercial banking solutions to encompass a broad diversity of financial products. We are currently focused on strengthening our position in investment banking.

What does Commercial Bank Investment Banking do?

The initial focus was on structuring and managing the Bank’s investments and lending activities in areas such as securitised investments, syndicated term loans and project loans. The focus of all this activity was debt of one type or another.

The Unit acquired equity-related investment banking expertise by involvement in some equity-raising assignments, initially with the joint structuring and management of the Ceylon Hospitals Limited IPO in 2003. Thereafter, multiple equity and debt structuring and management assignments were executed. The staff strength also increased as more products such as Margin Trading were added to the product portfolio.

Commercial Bank Investment Banking retains its traditional strengths of debt structuring and investment, as seen in high volume debenture investments in the past year. However, this is complemented with a range of equity based products, such as management of private placements and IPOs, as well as other products and services such as Margin Trading and Custodian services.

How would you rate yourselves against the competition?

Well, we are not the largest. I think when we look at the publicly available figures Commercial Bank Investment Banking would probably be in the middle at the moment. Of course the hope is that we will grow in size and scope, while providing customer convenience and satisfaction.

What is your main strength as an investment banking operation?

The main strength is probably the ability to integrate both our commercial banking and investment banking services in offering solutions to our customers. One example is in functioning as Bankers to the Issue for listed securities offerings such as IPOs, in which our extensive branch network and customer relationships strongly complement the services we can offer on the structuring and management side. Another example is when Commercial Bank Investment Banking structures a debenture or securitization, it also has the capacity to take up a substantial portion of the issue. This will provide considerable comfort to the issuers and a great deal of confidence to the other investors.

What other areas do you think you will get into in future?

The potential exists to either buy or build up fund management and stock broking businesses, within the overall scope of the investment banking operation, subject to regulatory approvals and the viability of the individual businesses. So this sort of inorganic growth is an area we might consider in the future.

To sum up, what is your vision for Commercial Bank Investment Banking?

To be a relatively large investment bank while providing innovative and efficient solutions for our customers and contributing to national economic growth by facilitating equity and debt fund raising assignments enabling companies to successfully execute their new ventures, projects and operations.

Timely move if not too late.i can only see NDB is actively undertake projects like IPO.we need a copetition there which will create a win win situation for the issuer and the bank.