July 07, 2016 (LBO) – Sri Lanka’s NDB Bank recently launched “One Account” to meet a need in the retail affluent segment, a bundled offering of a current account together with a credit card and a high-yielding money market fund.
Given the disjointed products currently offered to consumers in the banking industry, with inadequate returns, Lanka Business Online spoke to Prabodha Samarasekera, the CEO at NDB Wealth Management, to find out more about this product.
“We looked at the financial landscape, specifically the banking and wealth management market, and felt that there was a gap,” Samarasekera said.
“Nobody has offered a seamless, convenient product for the mass affluent market which combines banking as well as wealth management as a solution,” he said.
Individuals and families with monthly incomes in the range of 250,000 rupees to 500,000 rupees have options that are limited to savings and fixed deposits, and they say the need for convenience is extremely important.
Samarasekera said they felt the ideal package for this segment was a combination of wealth management and banking.
NDB now offers a current account, a credit card, and a AA plus or AAA rated money market fund which pays high rates, as an alternative to savings accounts and fixed deposits.
Money market return over 9%
The money market fund offered with the “One Account” invests mostly in risk-free government securities or similarly rated assets. The important feature here, Samarasekera said, is the ability to quickly transfer funds in and out of the money market through your current account.
“Right now the money market fund returns are over 9 percent, which is well above any bank savings account.”
Analysts say Sri Lanka’s banking products are disjointed as similarly rated banking products offer vastly different returns. A savings account with a foreign bank, rated AAA, for example, can offer an annual return of less than two percent, while a money market fund, rated AAA, can offer over nine percent.
Current risk-free yields on government treasury bills and bonds are over 10 percent per annum, which distorts the yield curve further in favor of lending to the government.
“More public awareness is needed so that retail investors can evaluate investments with the same risk rating properly,” he said. They can then compare assets across varying levels of risk.
The initial deposit for opening a One Account is 100,000 rupees, and there is one set of forms to open a current account, credit card and money market fund. All accounts will be linked to NDB Bank’s mobile banking platform in the future, he added.
While the One Account holder manages cash, pays bills, and can access deals on the credit card, income is credited to the money market funds daily.
With a higher balance, an account holder can access other investment products such as growth funds that invest in the share market or income funds that invest in government bonds or corporate debentures managed by NDB Wealth Management.
For high net-worth individuals, NDB Wealth Management has a private wealth management solution, where a relationship manager is assigned to every client backed by an experienced fund manager.
“This division works with the NDB Bank team as well, so if somebody wants banking, apart from the wealth management solution, we combine the two to provide that to clients.” A minimum portfolios in the private wealth management segment is around 25 million rupees.
NDB Wealth Management Limited has both a Unit Trust license as well as an Investment Manager license, and is fully owned by the NDB Bank.
The dominant shareholders in NDB Bank are state institutions such as Bank of Ceylon, and state pension and insurance funds, which collectively control over 30 percent.