Just retired Commercial Bank of Ceylon PLC Chairman Mahendra Amarasuriya reminisces his stint with the blue chip bank as Director, Deputy Chairman and Chairman, its meteoric rise from a conservative city based bank to the premium status it enjoys today, hostile acquisition bids by a business tycoon and conflicts of interests in shareholdings in the banking sector and his other career milestones.
It was in 1986 that just retired Commercial Bank of Ceylon PLC Chairman Mahendra Jayanthipal Chandima Amarasuriya was invited by the then Deputy Chairman S. K. Wickremasinghe to serve on the board. Commercial Bank, which was then a fledgling private sector bank, had its operations mainly lending to the corporate sector and confined to the Colombo city, and other cities like, Kandy, Jaffna, Galle, Kurunegala etc with only around 15 branches.
When the then Chairman Victor Tennakoon retired as Chairman, his Deputy SK Wickremasinghe became Chairman and Mahendra was promoted Deputy Chairman in 1989. It was in 1995 that Wickremasinghe decided to relinquish all his board positions on his appointment as High Commissioner to London by former President Chandrika Kumaratunga and Mahendra was the automatic choice for Chairman of the bank.
Statistics bear eloquent
testimony
Statistics speak eloquently for themselves. The year 1986 at the time when he was appointed to the Board, the gross profit was Rs. 58.5 million and a nett profit of Rs. 29.9 million after tax. The number of employees were 1094. When he took over as the Chairman in 1995, the gross income of the bank was Rs. 2.7 billion, pretax profit of Rs. 489 million and a post tax profit of Rs. 329 million. That was the beginning of his term.
At the time he retired at the end of last year, the gross income had increased to Rs. 41.5 billion and post tax profits to Rs. 5.5 billion which he attributed to excellent team work. The deposits mobilized by the bank which was Rs. 13 billion at the time he took over the bank in 1995, had soared to Rs. 259 billion in 2010! The advances which were Rs. 12. 8 billion in 1995 had soared to Rs. 223.8 billion. During this period, the number of employees had grown from 1849 to 4123. In 1995, the bank which had 35 branches has now grown to 187 branches by 2010 and 213 as of now. In addition, the bank has 198 employees in the 17 branches in Bangladesh. By end 2011 Commercial Bank has also 500 Automated Teller machines which is the largest network of ATMs in any bank locally.
It has been an unprecedented period of growth of the bank which has also run parallely in consonance with the growth of the national economy. All this information is available in the bank’s annual reports and this is all a part of a team effort of the management team and all staff members who were committed to the cause of the growth of Commercial Bank, Mahendra enthuses with obvious pride.
Pioneer of Corporate Planning
One of the cornerstones of Mahendra’s stint with the bank has been the introduction of Corporate Planning. Earlier, the bank was operating on an annual budget. He gave a sense of direction and developed a Vision and a Mission for the bank.
There was a time that the Commercial Bank was playing second fiddle to Hatton National Bank in the race for the best private bank in Sri Lanka. Subsequently, it overtook HNB and emerged by far as the best private sector listed bank in Sri Lanka.
Earlier, the bank had a culture of giving three months bonus and an increment as a routine annually akin to a typical government bureaucratic institution. Then, during 1985 when Standard Chartered Bank representative J.M. Morrison was appointed as the Managing Director, some fundamental changes took place in the corporate culture. Negotiations were held with the staff to absorb the three months’ bonus into the salary and it was a performance – driven culture where the increments were based on the performance, Mahendra reminisced.
One of the other strategies was the vigorous branch expansion and we became a national bank with branches in every nook and corner in Sri Lanka which helped us to mobilize more deposits. That was one of the reasons for the rapid growth of the deposits. Another reason for the growth in the bank is a super IT system which saw the integration of the operations. The IT network operation has very little down time compared to our competitors he said with obvious pride.
Hostile acquisition bids
One of the moves that would have changed the destinies of the bank was a hostile acquisition led by a business tycoon. By that time, Commercial Bank had also invested in DFCC and Mahendra was appointed to the DFCC Board of Directors.
Historically, there had been a 40% stake of Commercial Bank which was held by Standard Chartered Bank. Negotiations were afoot for this tycoon through Hatton National Bank of which he also had a controlling stake, to acquire the Standard Chartered Bank holding in Commercial Bank. In fact then Hatton National Bank Managing Director had personally met Mahendra and said that the negotiations had been completed and they were awaiting the Central Bank approval.
Mahendra contacted the Governor of the Central Bank only to be told that decision had not been taken in this regard. The Central Bank later decided against the decision of HNB to buy the Standard Chartered Bank holding in Commercial Bank which, if the deal went through would have triggered the Mergers and Acquisitions Code. The Central bank did not believe in one party having the controlling interest in both large private sector banks.
Hatton National Bank had made the original bid but DFCC Bank also evinced interest in the purchase. Mahendra and the Commercial Bank Board decided that DFCC being a Development bank was a better option for Commercial Bank as Hatton National Bank was competing directly with Commercial Bank. It was made known to the Central Bank that the DFCC bank was a better option to purchase the Standard Chartered Bank stake in Commercial Bank. The controversy ended with DFCC Bank buying 29%, employees were given 5% under an Employee Share Ownership Plan and the remainder was placed in the market. Then two DFCC Directors were appointed to the Commercial Bank Board.
Then, in a bizarre move, the control of DFCC bank was taken over by the same tycoon and with the 29% of DFCC Bank in Commercial Bank, he got indirect control of Commercial Bank which he originally sought to get control of!!
Mahendra made representations to the Central Bank again regarding the related parties which held 42% of Commercial Bank, but to no avail. He tabled the letter written to the Central Bank at the CBC Board. But did not minute it! Then he addressed another more detailed letter spelling out how such holdings were undesirable which was tabled, at the CBC board. The DFCC representatives on the CBC board took umbrage over it. That was also the time that DFCC Bank CEO was on the Commercial Bank Board. He took strong objection to the letter. Mahendra wrote the letter in his capacity as Chairman of Commercial Bank, while sitting on the board of DFCC Bank as well!
The CEO of DFCC wrote to the Central Bank saying that DFCC Bank was not in agreement with Commercial Bank’s proposal that the DFCC Bank’s stake in Commercial Bank be brought down to 15% with the approval of the Central bank as the prevailing regulations specified. Standard Chartered bank had the historical ownership of 40% and had been told to divest their stake which they had not until that time!
The DFCC Bank took up the position that Mahendra, while remaining on the board of the DFCC Bank was acting against the interests of the DFCC Bank! Mahendra resigned.
The business tycoon by that time had acquired 90% of the stake of Sri Lanka Insurance Corporation Ltd for Rs. 6 billion under the privatization of the Ranil Wickremesinghe government there by acquiring indirectly a further stake in Commercial Bank and brought a motion of no confidence against Mahendra as Chairman of Commercial Bank. No reasons were attributed. Talk of boardroom manipulations!
The Ceylon Bank Employees Union, the Staff Union and the Executives Union went to court demanding that the DFCC Bank and related parties were mandated to vote only up to the 10% of the shareholding that it was legally entitled to. That was the contention. The law suit was against Insurance, Distilleries, DFCC Bank and a whole host of others.
The Unions had asked for a stay order. An EGM was convened to consider the no confidence motion. It was a rumbustious meeting where the Union leaders and others filibustered and delayed the commencement of the meeting. There were the union leaders such as CBEU Chief M R Shah (now Chairman of the listed Merchant Bank of Sri Lanka) who were vociferous protesting against the DFCC and related parties voting up to total shareholding of 42% and not the 10% they were entitled to vote. With the meeting delayed due to the filibuster, the Court stay order was communicated just after the meeting commenced, that the DFCC and related parties could vote only up to 10% of the shares which they were legally entitled to vote on.
If the Court order got delayed, I would have been removed as Chairman Commercial Bank and the court order helped me from escaping by the skin of my teeth and continue as Commercial Bank Chairman in 2005!, Mahendra chuckled.
It was a stirring battle where the Board was also divided. Some of the board members were not on Mahendra’s side it was crisis time and saga for big problem.
There was no justification in throwing me out. The growth of the bank was higher than the inflation plus the GDP growth consistently year after year and the actual growth had been phenomenal he reminisced.
2011, the last year that he had been Chairman had recorded a peak in growth and it was reported to the shareholders that the profit as at end September 2011 was over 6 Billion which was the highest among the private sector banks.
Mahendra says that he had to at times push the management team hard without which they may have become complacent, being selected year after year as the best bank in Sri Lanka.
Awards and Accolades
"We were judged the best bank in Sri Lanka for 13 consecutive years by the Global Finance Magazine, the Bank of the Year in Sri Lanka by the Banker Magazine on eight occasions and also ranked among the best thousand banks globally on two occasions." These are achievements that we have to be proud of, he explained but they could have led us to complacency.
He also said that the entry into Bangladesh where we fortuitously acquired the business of Credit Agri Cole Indosuez, was also fulfilling and that is where about 15% of the Group profits come from. We started with only three branches and two service centres and now we have 17. The technology that was available with us in Sri Lanka was transferred very effectively to Bangladesh. It has been a very successful acquisition.
He also paid tribute to the Managing Director, the Corporate Management Team, the Brach Managers and their staff as well who were instrumental for the rapid and sustainable growth of the bank. It has always been a pleasure and a challenge for me to work as Chairman of Commercial Bank but there were the turbulent times as well. "We however chartered our course positively with our vision in mind," he said.
Hayleys, United Motors, Pelwatte Sugar and J BiZ Forum
Mahendra, who rose through the ranks to emerge Deputy Group Chairman of Hayleys, also believes that the late and legendary Hayleys Group Chairman D.S Jayasundera was his most profound career influence.
He was a visionary, exceptional and very knowledgeable in finance and general management albeit not having a tertiary academic/ professional background and I cannot think of a better Hayleys Group Chairman than him. He was also the best corporate sector Chairman during his life and times, he said.
He is the one who recruited me as a Management Trainee straight out of Colombo University and it was under him that I learnt about Management and the manner in which Blue Chip companies are run, he said.
Mahendra a product of Royal College, Colombo where he won his Tennis Colours, joined the Colombo University to read for a Botany Honours Degree with Chemistry as a subsidiary. In which he graduated. "I was vying for Honours but panicked in the final exams resulting in not obtaining a ‘class’.
He also sees the Dhammika Perera acquisition of the controlling interest of the Hayleys Group as a strategic move in acquiring one of the foremost conglomerates in Sri Lanka whose true potential had not been realized since the demised of Mr Lal Jayasundera. He acquired the company at the time relatively cheaply as the shares had dipped, but he would have seen the potential of the Group. We don’t know in which direction he will charter the course for Hayleys, I only hope that he will maintain its ethics and management culture, Mahendra said.
He was promoted Deputy Chairman to Sunil Mendis with the untimely demise of late Lal Jayasundera. Then Sunil Mendis was senior to me at Hayleys by around 5 years as he had joined as a management trainee direct from Royal College, whereas I joined after graduating from the University. The board at that time preferred Sunil Mendis to me to succeed Lal Jayasundera.
United Motors
Another landmark in his career was when he was appointed to the Board of United Motors Lanka PLC which also was the first state entity to be privatized, which President Ranasinghe Premadasa described as "peoplised"!!
President Premadasa handpicked the United Motors Board with Karu Jayasuriya as the Chairman, Chandra Jayaratne as Finance Director, Eraj Wijesinha as Marketing Director and me to overlook Human Resources with my background in HR at Hayleys, he said.
"United Motors was a brand leader with the Mitsubishi agency despite fierce competition from Associated Motorways PLC the Nissan agent and Toyota the global market leader. With Karu being appointed as Ambassador to Germany, I was appointed Chairman," he said. During my Chairmanship United Motors was considered to be the foremost company marketing automobiles.
Another one of the companies that he headed as Non- Executive Chairman is Pelwatte Sugar Industries PLC after its acquisition by business magnate and entrepreneur Ariyaseela Wickremanayake. The sugar company made profits after 3 years and reduced its debt burden. It declared dividends of 10% and 12% respectively in two consecutive years. There after due to two years drought and a result of deceases caused by insects such as the Wooly Aphid’s, the company continued to lose money until it was acquired last year by the Distilleries company.
Pelwatte has two more ambitious projects. One is a milk production venture with a Danish manufactured state of the art milk processing plant and the other a resort hotel which was abandoned a few years ago due to the company being cash strapped.
His two year tenure as the Joint Business forum [JBiZ] Chairman was one of the most challenging in Sri Lanka’s contemporary history. With Chandrika Kumaratunga as President and Ranil Wickremesinghe as Prime Minister, there were many confrontations. All efforts made by the private sector through the JBIZ to adopt a bipartisan consensual approach failed and parliament was dissolved despite Ranil Wickremesinghe’s government having a majority in parliament.
No diplomatic posting!!
However, at 71, he has no plans of joining any corporate sector entity. I just want to relax, he said. Asked whether he likes to pursue his pet sport in his youth- tennis, he said that he had a "Slipped Disc" which prevented him from continuing the game in later years.
Asked in lighter vein whether he was vying for a diplomatic posting, given that his Brother in Law was External Affairs Minister Prof. G.L. Peiris, he exclaimed: "That would be interpreted as nepotism!"
The way the wind is blowing!
It has been "The way the wind is blowing" all right for Business Leader and just- retired Commercial Bank Chairman Mahendra Jayanthipal Chandima Amarasuriya with the goings on within the last decade with hostile takeover bids of the bank by various parties and board room manipulations behind his back, which he survived until he stepped down end last year after a 16- year stint as Chairman and 25 year old stint as Director. Here, he is captured by the writer leafing through the Commercial Bank Annual Report last year themed: "The way the wind is blowing" at the dining table of his Fife Road residence, Colombo 5, reminiscing the performance of the bank in the last year under his stewardship.
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