Prime Bank speeds up digital push to spur growth

Most companies should be content if they just can manage to stay afloat in the face of the devastating coronavirus pandemic. But Prime Bank Ltd has not only been weathering the toughest crisis in living memories for the last six months, but it has also brought home global recognitions.

In July, the private commercial bank was named as Asia's one of the best for its proactive response to the pandemic.

London-based reputed media publication Euromoney conferred the Excellence in Leadership in Asia 2020 Award on Prime Bank in recognition of the bank's large-scale initiative to safeguard the interests of customers and safety of the employees.

"This is a unique feat for Prime Bank as it was the only bank from South Asia to earn the title in 2020. It is a huge recognition," said Rahel Ahmed, managing director of Prime Bank.

The bank took preparation much before the deadly pathogen arrived on the shores of Bangladesh in early March. It got down to work in the middle of February after seeing that the virus was bringing down economies after economies across continents.

To start, it began raising awareness among the employees and their families. It distributed leaflets among walk-in customers in the first half of March, telling them how to maintain hygiene and take health safety measures. It even distributed masks among customers who arrived without wearing ones.

The whole premises are sanitised twice a day and furniture every 45 minutes and the bank sticks to health guidelines.

Only 25 per cent of its 3,150-strong workforce went to the office on a rotational basis from March 26 to May 30, a time when the whole country was strictly under a lockdown. When possible, no women employees were allowed into offices, let alone pregnant women or the elderly with underlying health conditions.

The bank was quick to respond whenever it found Covid-19 symptoms in an employee and the human resources department would begin contact-tracing. The persons who had come into contact with the suspected individual were put on quarantine and isolated immediately and replace them with another group of staff.

In the first week of April, Ahmed personally wrote to each of the bank's customers, informing them what the bank was doing in tackling the crisis and what is expected from them.

Because of the movement control order in the first two months of the lockdown, it allowed employees to work at the branch that is the closest to their residences.

"We made the most of the work from home concept. As a result, more than 20 to 30 per cent of the employees did not have to come to the office simultaneously," Ahmed told The Daily Star in a virtual interview recently.

Today, more than half of the workforce is still working from home. "But it did not cause any disruption to our banking services. We have maintained our service standard and efficiency," he said.

Ahmed joined Prime Bank as a deputy managing director and chief business officer in early 2015 and became the CEO in December 2017.

Previously, he worked with ANZ Grindlays Bank and Standard Chartered Bank in Bangladesh and Emirates NBD Banking Group and First Gulf Bank in Dubai.

The pandemic has accelerated the shift to digital. But the segment was not unchartered territory for Prime Bank. The bank has been working on digitalisation for the last two years.

"As a result, we have not opened any new branches in the last four years and have no plans to open any in the future either," Ahmed said.

It rolled out PrimeDigi in February last year, this is the first digital savings account in Bangladesh. Now, customers don't need to visit branches to open the account and avail all the services digitally.

PrimeDigi was introduced at a time when the central bank had not rolled out the electronic know-your-customer (e-KYC). The digital account brought international recognition for the bank when it clinched Digital Bank Award from Hong Kong-based AsiaMoney in July.

Prime Bank has introduced collateral-free loans for ICT, outsourcing, internet and e-commerce startups.

"The Covid-19 crisis has shown in the last five months that digitalisation has no alternative," Ahmed said.

"The future of banking is already here – it is no longer in the future. The present is the new future. Banks' future is no longer brick-and-mortar branches."

According to the career banker, millennials, approximately those born from 1980 to 1995, are the critical mass of the population and they don't want to visit a branch to carry out banking transactions and secure any services. Rather, they want to do it on their handheld device and from their desktops.

"Accordingly, Prime Bank has been positioning itself in that direction."

Prime Bank is looking to expand its network through the introduction of agent banking. Recently, it received the approval from the central bank to roll out agent banking and it would go for the implementation by this year. 

The bank looks to grow by collaborating with financial technologies and mobile financial services and other related companies.

Ahmed said banks can set up branches or sub-branches to reach out every nook and corner of Bangladesh. But the easier route would be to tie up with others digitally, a move that would increase efficiency and cut costs.

"We are looking for more collaboration and more synergies, mostly through digital channels. This is our main goal now." 

He thinks that it would be a difficult proposition for a bank to roll out a separate MFS service because of the cost involved in bringing the service to a critical mass.

The bank making its internet banking platform stronger and its app more robust.

The bank is automating all of its business processes. All of the credit approvals in all customer segments have been given digitally in the last five months. The use of papers in the bank has come down to one-fourth.

He said the board has been generous about investment in digitalisation and this is something the board wants to continue.

"We are aspiring to be a digital bank. We are transforming our processes into digitised formats and aspiring to create conveniences for our clients as much as possible through digital media."

Prime Bank has tied up with major trade bodies dealing with the ICT sector.

"This is because the ICT sector has a huge prospect in Bangladesh. Unquestionably, the prospect has increased multiple times in the last five months," he said.

The bank is currently working on re-sizing 25 banks.

This year marked the 25th founding anniversary of Prime Bank.

"We may not have good-looking or posh branches, but Prime Bank's customers did not have to worry whether they would get back funds when they want," Ahmed said.

"We have achieved this level of trust in the last quarter-century."

Up to 95 per cent of the deposits have been renewed. Even during the pandemic, net deposits have grown steadily.

The bank's total deposits jumped to Tk 22,616 crore as on June 30, 2020 from Tk 21,644 crore at the end of December 2019, registering a growth of 4.49 per cent.

In the first half of, the bank earned a net profit of Tk 61.88 crore on a solo basis, down from Tk 99.27 crore in the corresponding period last year.

Its capital adequacy ratio was 18.31 per cent in the first half, the highest in Bangladesh. "This gives assurance to customers that Prime Bank has adequate capital support," Ahmed said.

Ahmed touched upon challenges confronting the banking sector.

The banking sector had been under challenges before the pandemic and the challenges exacerbated because of the pestilence.

Businesses came to a standstill in April and May. The interest earnings in April and May have shifted to a blocked account.

The banking sector has been given a great responsibility of disbursing a majority of the Tk 103,117 crore stimulus packages unveiled by the government at their credit risks.

The repayment of instalment has been delayed because of regulatory forbearance and banks can't change the status of borrowers until September. 

The 9 per cent interest rate cap is another major challenge as it gobbled up 25 to 30 per cent revenue straight away, Ahmed said.

"The biggest challenge facing the banking sector is how to maintain operational efficiency and manage the operational cost," Ahmed said.

Some banks have tried to manage costs by cutting salaries or trimming workforce. Prime Bank does not want to take the path. Rather, it analysed various components of the costs.

Because of work from home and digitalisation, the bank would reduce 50,000 to 60,000 square feet of office space by the next six months as it is currently re-sizing 25 branches, he said.  

About 40 to 45 per cent of SMEs have reported been closed. So, lending to SMEs is another major challenge. Similarly, banks would have to lend to large businesses cautiously.

"It is very difficult to lend SMEs at 9 per cent while maintaining the acquisition and maintenance cost," he said.

The bank is revisiting operational processes to see how much of them could be digitalised.

"We are doing all these to offset the shrinkage in profits as much as possible."

Ahmed, who has an MBA from the Maastricht School of Business in the Netherlands, said the country can't be complacent as it is staring at some major challenges.

The fall in remittance may deal a major blow as migrant workers are losing jobs and they are already coming back and they may come back in droves if the global economy squeezes.

"We have to think about how we can rehabilitate the workers and fill the gap in remittance income."

The government would have to pay close attention to expenditures and carry out the expenses maintaining as much governance as possible, he said.

"If we can do that, I don't think that the recovery would be a major challenge."

Of the stimulus packages targets set for the bank, it has disbursed 70 per cent of the Tk 940 crore loans to large industries and 100 per cent of the wages support.

In the case of SMEs, it has reached 15 per cent target of the lending goal of Tk 250 crore by 2021.

"Hopefully, we will reach the target by April 2021. We want to reach out as many people as possible."

The bank has given payment holidays to many clients, pushing back the repayment period.

"We have not done this in a wholesale manner. We gave them tailor-made solutions depending on their requirements," Ahmed said.

The interest rate cap is a major challenge for the retail and SME loan segments. The policy-makers should re-consider it, he said.

"The lending cap is not only putting pressure on the banking sector; there is a rippling effect on other sectors, including the stock market."

He thanked the central bank for paying heed to the demand of the banking sector on introducing a credit guarantee scheme for loans going to the SMEs. "It would benefit us to a large extent. It will accelerate the credit flow."

Prime Bank has made a major stride in non-performing loans (NPL) management. It is hovering around 4.5 per cent now against the industry's average of 10 to 12 per cent. It had planned to bring it below 4 per cent before the pandemic hit. 

According to Ahmed, once the moratorium on loan classification is withdrawn, the banking sector would see a higher NPL.

"Nobody can say that it would not affect them. The impact would depend on how good a bank can do risk management and put aside funds in advance as provisioning." 

Recently, lending has picked up marginally in the banking sector. However, momentum is slow in the retail segment. There are requests for loans in the corporate and SME segments, he said.

The corporate and commercial banking accounted for 73 per cent of the loans of Prime Bank, while the SME and retail banking making up the rest.

According to the 48-year-old, crises often offer scopes to address long-overdue changes to any industries and the banking sector is not an exception.

"The first learning from the pandemic is there is no alternative to going digital. Second, the pandemic has taught us to stay very close to your client."

"Connectivity with clients and relationship with clients is the most important thing. The work style has to be changed."