Sri Lanka’s Seylan Bank will shed up to 1,000 jobs through a voluntary retirement scheme starting this year, as part of its restructuring and to bring its costs in-line with other banks with a similar sized asset base, its chief executive said.
“We would like to see at least part of it happening this year, there is a consultant looking at it,” said Ajita Pasqual Seylan Banks Chief Executive in an interview.
“Whether it will be in tranches or will be across the board are decisions we have make. In the middle of next month he (the consultant) will give us as plan and then the board will meet and set up two teams to drive it.”
Seylan Bank had a tumultuous 2009 when a crisis of confidence in firms controlled by Lalith Kotelawala, which included the bank, resulted in a run on deposits. Central Bank intervened by appointment a new board of directors and sidelining Kotelawala and his nominees.
Seylan has one of the highest cost structures in the industry largely due to overstaffing which the new board is now addressing after stabilizing operations.
“What we are rationalising branch staffing levels. Excess staff have been moved to areas like recoveries, business development and we have strengthened audit and set up a new risk unit. We have moved people in to those areas,” says Pasqual.
“We will reduce a max of one thousand, it’s any figure between 500 to 1000 I would say,” Pasqual says, but is unwilling to commit to a figure on the cost of the voluntary retirement scheme.
He estimates the bank will make a ‘substantial cost reduction, maybe 750,000 rupees per staff member who retires’.
Seylan, which has a 132 billion rupee balance sheet and 93 branches, has 3,726 staff according to the banks annual report.
A competitor bank HNB, which also has a retail and small business focus, has 4,300 staff to manage a balance sheet and a branch network that is twice the size.
The bank plans to open nine new branches including four more branches in the former war torn North and East of the island soon. Since the fighting ended it has opened four branches in former war affected areas.
Seylan curtained salaries and benefits costs to 2.3 billion rupees last year form a 3.3 billion high in 2008 by not paying two months salary as bonus to staff. By comparison HNB spend 4 billion rupees last year on salaries and staff benefits.
Pasqual says staff at senior manager and higher levels decided to voluntarily forego their annual salary increment this year although the banks balance sheet is on the mend.
Gross non performing loans are down to 25 percent of the loan book by the June quarter of 2010 form a 33 percent high last year.
Pasqual says actual non performing loans are also down from 31 billion last year to 27 billion in the June quarter of 2010.
To recapitalize the bank issued new shares last year. Lalith Kotelawala and firms he controlled didn’t subscribe to the issue and his control has now slipped to eight percent according to Pasqual.
The LOLC group, Bank of Ceylon, NSB and Sri Lanka Insurance are the largest shareholders of Seylan Bank.
