Although the Asset Management Corporation of Nigeria (AMCON) is in the process of attracting new investors for the three bridged banks, Managing Director, Enterprise Bank Limited, Mallam Ahmed Kuru, in an interview with some business editors in Lagos last week said Enterprise Bank, like the other three banks, cannot be distracted by the AMCON’s timetable given the fact that the mandate given to the management of the affected banks is to compete favourably in the industry. Festus Akanbi was there
Sometime ago, the CBN intervened in some banks because they were adjudged insolvent; the apex bank appointed some managers (your predecessors) that were later sacked for non-performance. But the same CBN went ahead to pay those managers huge sums of money only to appoint a new set of managers. Why pay these sacked managers that did not perform well?
Every management has a different mandate. When the previous management came on board, after the CBN’s special examination of 2009, the banks were almost collapsing. So the CBN sent those managers to stabilise the situation and find core investors for the ailing financial institutions. So their mandate was simple; stabilise the situation and find core investors.
At the end, they succeeded in stabilising the banks. Five out of the 10 institutions succeeded in finding core investors. The apex bank only intervened and appointed new management for the only three that could not meet the CBN deadline with another responsibility to complete the cycle. But we were appointed to come and run these institutions as commercial entities. When we came on board, we were not challenged by issues of negative assets or inadequate capital. By the time we came, all those issues have been addressed by the Asset Management Corporation of Nigeria (AMCON). So, we were given the institutions and mandated to run them commercially and competitively and I think that that is what we have done and what we are doing and we are on the right track.
These three banks are strong enough today to compete favourably with all other operators in the industry. Anybody that was appointed was based on contract. So they are ultimately compensated at the end. I will not define the amount paid to them as huge, but I think they were adequately compensated based on their assignment.
The last pronouncement by AMCON was that the three nationalised banks would be sold by next year, would this announcement have any kind of setback on your current operations?
AMCON made a statement that the banks would be sold either next year or this year or anytime they like. For us the statement is not affecting us. What is important to us is to run the institution commercially, profitably and put all the structures on ground to ensure that business continues according to the mandate given to us. This is because whoever steps in to buy the bank is not coming to buy just structures. He is coming to buy the value that is in the structures, the quality of the customers that the bank has, the balance sheet, quality of staff and infrastructure among others. Those are the things that a buyer will want to see. To run the bank profitably, these are the areas we are concentrating on and our projections are in three and five year plans.
What specific figures can you give us to show that you have improved the fortunes of the bank in the last one year?
We have grown our deposit by 27 per cent. As you know, the industry average growth rate is 15 per cent, but we have grown ours by 27 per cent between last year and now. On loan book, the industry growth rate is 16 per cent; we have grown ours with 200 per cent. In the area of total asset, the industry growth rate is 15 per cent; we have grown that of Enterprise Bank by 26 per cent. On Return on Investment (ROI); which is also important, the industry rate is 7 per cent; we have achieved about 20 per cent. By any standard anywhere in the world, if your ROI is 20 per cent, it shows that you are not destroying value. In the previous year, the bank was in a loss situation, now we have reported profitability in billions, I do not want to mention figures; because the auditors and the Central Bank of Nigeria (CBN) officials are currently checking our books. I can tell you that in the next couple of weeks we will.
What does your bank Logo signify?
The bank’s logo is a metaphor for the innovative, enterpreneurial spririt of Enterprise that is the foundation upon which the values of the bank are built. The colours of the logo present a combination of focus, sharpness and brilliance. The bank’s aspiration to brilliance is reflected by the choice of yellow: bold and outstanding in the banking sector. In contrast, the black offers the stable trusted element required from a financial services institution such as Enterprise Bank.
Looking at the decision of the Bankers Committee to pioneer and kick off the Financial Inclusion (FI) initiative in Borno State, would any chief executive send a staff to Borno State, considering the current security situation in that place?
The issue of insecurity is not peculiar to Borno State. If you go to New York, the security risk is very high. These days in New York there are certain streets you cannot walk at night. Yes the issue of security in Borno is a problem, but I can say that you do not just employ people and send them to a volatile area just because you want to prove a point.
Every organisation has the responsibility to protect its workers. However, part of the structure we want to leverage, besides the bank branches that are currently in those locations are the post offices, which we have in almost all the 774 local government areas in Nigeria. How does this work? Post offices were manned by local people that speak the local dialect. So in the Financial Inclusion initiative, local people will be recruited for the project. There are people that hail from those volatile areas. You do not need to carry people from other locations to a different place. So, what we need to do is to build capacity and train them. You need to be conscious of the lives of those people that are going to manage it and try as much as you can to ensure that you eliminate any kind of danger that may befall people you are bringing from outside. If we are able to succeed in doing something in a state that has so many issues, then it becomes easier for us to replicate those things in other locations.
The security issue has been taken into consideration. It is always at the top of the agenda and that is why the federal and state governments, the Bankers Committee and security agencies are involved to ensure that no life is lost in the process. Some of us strongly believe that it will work and we pray it works because some of these security challenges also have linkages with economic empowerment and economic activities like youth restiveness and so on. We believe that the banking industry has the capacity to do something that will benefit the society.
You mentioned that you have put structures in place; I want to believe that one of the major challenges that led to the collapse of the former bank was the challenge of structure. I want you to be specific on what you have done so far?
What has happened is that when the CBN intervened, they realised that most of these banks got affected because of lack of good corporate governance structure. At Enterprise Bank, the first thing we did was to initiate a very strong corporate governance structure. And we insisted that there must be strong policies to this regard. Again the level of regulation has gone up. In our bank as small as we are, we have a 16-member Board. We have five Executive Directors in addition to the Managing Director. We have 10 Non-Executive Directors. The least amongst them was a former Executive Director in a bank. We brought credible people and put them on the Board so that the corporate governance structure will be strong to avoid any abuse of process. So, everybody on the Board is an independent character. They are professional people. The Chairman of the Board is the former Managing Director of Diamond Bank. He is a professional and disciplined banker. So, CBN has ensured that what happened in the past will not happen again. It is usually the abuse of process that allows banks to engage in unethical practices. Now proper and due process is followed in whatever is done.
In the first meeting we had with you in December 2011, you said you wanted to be a medium-sized bank. Now, considering all the achievements you highlighted, are you still a medium sized bank?
We are still a medium-sized bank. If you look at the unverified figures that I gave you in absolute terms, you will see that if I grow by 20 per cent of N200 billion or N40 billion, and another bank, for example, grows by one percent of say N5.0 trillion, in terms of size, I am still a medium-sized bank and I want to be a medium-sized bank. Like I said in December 2011, we are not here for any size game or size war. We want to be an efficient bank and that is our strategy.
What is the current number of depositors in Enterprise Bank?
In December 2011, we said we had about 1.5 million customers. What happens in the industry is that you always have five to 10 per cent dormancy and deposits continue to go down. We have not gone farther than the 1.5 million, because immediately we stop managing dormant accounts, you realise that naturally we have to drop so many accounts. In those days, what banks do is to go for mass market appeal. They go to the market and start opening accounts with zero N20.00 balance. When you start evaluating some of these accounts you see that in many years, their owners are not maintaining them in spite of incessant appeals by the account officers. So because of administrative costs you need to remove them so that you will continuously have a realistic number to work with.
We are aware you have a relationship with Union Bank UK. What is the relationship like now?
Union Bank UK has continued to support us. Last week, we had a major transaction with them. They are very happy with us and we are equally happy with them. We will continue to maintain a good relationship with them and similar institutions that we work with.
You have listed the things you have done so far for the bank, which ones have you not done yet?
There are so many things that we will want to do. All those things that we highlighted are already work-in-progress. I am working towards having a cost income ratio of 50 per cent. When I came, the cost income ratio was around 180 percent. Now I am around 88 per cent, which is a very good progress.
On loan to deposit ratio, industry average today is about 80 per cent and I am looking at making it 15 per cent. I have not reached the level of efficiency that I want to achieve. To train staff is not an easy task. It takes time; you cannot turnaround all sectors regardless of whatever you have on ground in one or two years. The only thing you can do is to put those things that are necessary on track and then you start to measure them. I think that is what we have been able to do. I want to have a traditional institution. In terms of percentage, maybe only five percent of my customers will come to my bank. I want to be a traditional institution that is leveraging innovation and technology to deliver an efficient service. We have not achieved that yet, but we are on track.
Where do you think that the bank will be at the end of 2013?
I want to be a formidable bank; where you can identify with me and know when you come into my banking hall, all staff will be able to answer and give you an efficient service; this takes time; but we are on track. I am happy with the progress we have made so far and happy we are on the right track to be anything that we want to be in the industry. We must continue to innovate; invest in our human capital; invest in technology and have the freedom and process that we are able to do what we want to do. Once we are able to put those things in place, I am sure we will be where we want to be.
There is no going back in Nigeria. For us first and foremost, we want to take it to the next level. At the end of this year, I want to have about three per cent of the market. I do not want to be like bank ‘A’ or bank ‘B’. I want to have my own market share. I want to know that I am making profit. I want to concentrate on the target I set for myself regardless of what every other person feels. At the end, I will then achieve my target of being an efficient and service delivery oriented bank.
How many branches have you opened since coming on board?
When we were appointed, our mandate was to consolidate the bank. On the number of new branches that we have opened, you will agree with me that this is an era where we are gradually phasing out the idea of having 10 branches on a particular street because people now increasingly want to transact banking business in their homes and offices. So, instead of spending so much time in opening new branches, our strategy is to consolidate the 152 branches that we have, before the end of this month. We are going to open in five states because we did not have any presence in those five locations.
We want to be represented in all the state capitals, so we are going there as a strategic move not one driven by profitability; but ultimately, it must be profitable.
So, we want to make sure that wherever you are, you can reach us even leveraging electronic infrastructure built by other people. You can reach us on the internet or go to the ATM. I believe things are changing; because if you go to developed countries, hardly will you find the kind of banking halls that you find in Nigeria. You will see one little place, sometimes, you have to ring the bell before you go in. But you will marvel at the volume of transaction that is going on in that office because everything is now technology driven. As a banker, 80 per cent of my transactions are done on the telephone. So the moment I have to go to the banking hall, I feel a little constrained. You do not want to go to the banking hall to waste time just because you want to collect cash. For us at Enterprise Bank, the emphasis will be more on technology driven channels rather than the kind of branch banking that we are used to.
What are you doing with the assets of the legacy bank you inherited?
The ACB International Bank assets, just like those of the other bank assets in the merger that produced the legacy financial institution are huge assets to the bank. What we are trying to do is to ensure that we get maximum benefit out of them because at the end, when the institution is valued, they will also count in that process. We are trying to extract maximum benefit out of our premises. The buildings we are not using, we will maintain them and rent them out. The plan is not to sell any asset but to use them as a basis to earn some income.
How do you cope with over-regulation by the Central Bank of Nigeria?
What happened in 2009 has made CBN to intervene and tighten their regulatory processes. All over the world, regulations have increased tremendously. I think the financial sector, mostly the banking industry, is the most regulated in the world. The most important thing is that it is for the good of the industry because what the CBN is trying to do is to remain alert and alive to the function of monitoring so as to avoid the mistakes of the past. That is why they continue to roll out guidelines. I can also tell you that most of the circulars they put out are also discussed at the Bankers Committee meeting. They carry everybody along and as partners, together, we see how to position the industry so that it is not driven by individuals but by structures. If anybody comes into the system, regardless of what happens, the structure will mould his conduct. No, we are not distracted by the regulation but rather encouraged by it. So, we will continue to operate in a way that we do not go contrary to the CBN rules and regulations.