With the end of Sri Lanka’s civil war, global and domestic banks are eyeing investments in a country that has up to now attracted a great deal of caution from financiers.

The eerie colonnades around Colombo’s Fort district tell the sad story of Sri Lankan banking through 26 years of war. Fort’s financial district was once prime real estate in a city regarded as a rival to Mumbai for south Asian mercantile primacy. Today, the bank buildings are decayed and dilapidated, abandoned shells like much else in the neighbourhood. But there might be life yet in Fort now that Asia’s longest running civil war has been won by the government in Colombo, albeit at a high human cost.

After an 18-month campaign, government forces have all but eliminated the once- rampant Tamil Tigers. The north-eastern third of the island, which the Tigers once controlled as what was effectively a separate state, is set to be re-absorbed into the Sri Lankan mainstream.

If the warring sides can be reconciled, a reunified Sri Lanka comes with the prospect of $5bn in redevelopment possibilities. It has put a spring in the step of Sri Lankan bankers, as local architects dust off plans to refurbish Fort and its grand banking chambers.

Business quickly signalled its confidence. Colombo’s sluggish stock market jumped by 6% and the rupee strengthened 4% in response to the news that the Tigers’ leader, Velupillai Prabhakaran, had been killed in battle.

“There are bridges, roads and schools to be built,” says Amitha Gooneratne, managing director of the country’s biggest privately owned bank, Commercial Bank of Sri Lanka, which has just opened its 171st branch. “We want to expand our reach in the north-east. It can become our own emerging market.”

Sri Lanka’s Tamil community was the island’s business mainstay before the war, skills much needed in an economy run down by huge defence spending. Hatton National Bank’s chief financial officer Nihal Kekulawala, notes the “extremely high” savings levels at branches in Tamil regions. “Tamils are great savers and loan repayers, much higher than the national average. There is great potential,” he says.

National reconstruction plan

At Nations Trust Bank, a medium-sized privately owned retail bank that rose from the 1980s ashes of Hong Kong-owned Overseas Trust Bank, chief executive Zulfiqar Zavahir says he “would not hesitate to participate” in the national reconstruction plan. “We have a lot of optimism,” adds Mr Zavahir.

“As soon as it opens up, we will be there,” says Mr Gooneratne. “The light at the end of the tunnel is to get one-third of the economy back into the fold. The east has traditionally been the breadbasket of the country. There’s a lot of rice paddy production and a lot of the fisheries are in the north.”

HSBC is already a significant lender. “We are standing ready to assist,” says country head Nick Nicolaou. “We are the major provider of commercially funded infrastructure finance in this country. Over the past 18 months, we have provided $1.5bn of funds either directly to the government or by way of project financing.”

HSBC has backed a big power project, a fisheries harbour and a network of new roads and bridges. Some of it is direct sovereign lending, while other projects are backed by official export credits from abroad. With regards to retail banking, Mr Nicolaou says HSBC is looking to open new branches. “There is no question that there is lots of money in the north and east,” he says.