By Omoh Gabriel
Last week Heritage Bank board and management had an interactive session with the media. Here is excerpt of the interaction
Your reaction to likely impact and immediate effect of Treasury Single Account (TSA) as being directed by Central Bank of Nigeria, how do you think banks can navigate through that challenge?
Our thought of TSA given the government position is essentially that you do not want government borrowing government’s money hence government is trying to ensuring that it is not borrowing anyhow money and it can account for all the money it got. TSA in itself is not a bad a idea, banks naturally are a bit reluctant in pulling it back because they need to unwind some transactions that are wrap around them.
The implication would be that banks need to do a lot of thinking to grow their deposit base, do lot of thinking to be able to transfer the money and yet stay afloat. Banks thought will always be to see if the withdrawn amount, the CRR tied to it would be reviewed downword.
Effect, when naturally that amount of money as largely published, is pulled out of the system and the systems have some shocks, and the financial system also has a way of balancing such out and we believe that such balancing will happen in the next few days and whatever negative effect, I think the government also should also mindful that the system did not collapse and the central bank governor said so recently, I am in line with him that they are mindful and we are watching.
When do you have intention of coming to the market and need to be listed on the capital market?
Naturally, banks will want to come to the market but when the conditions are right, we are looking at the conditions and once they are right, we will be advised by the board to proceed to the market. Raising of capital especially economic capital is something that every bank keeps an eye on and we want to be sure that we are in tune with what economy capital is in the capital market.
What Heritage Bank stands for?
In Heritage Bank, we pride ourselves in the field in such a way that we want to be innovative and; we cannot be like any other bank, the fact is that we cannot came in at the time that we did and still behave like any other bank, we would have died.
We have been creative, innovative and we will continue on that threshold. We pride ourselves as being the service bank and we are not apologetic about it, we are a service company that is the way we see ourselves, a service company in the business of offering financial services.
I guess we already had some nomination by some of the beneficiary’s organisation and that we are trying to be watchful, we will rather want to be a bank to be known for helping SMES, opening up a banking space in terms of retail. Above all helping people to transfer their wealth after they have created and preserved it to the next generation.
Heritage bank getting to other areas of the country particularly in the South-East and other part of the country.
With what we have done, we are virtually in every part of the country with the numbers we have in South-East, we are generally thinking of how do we cope. It is not fashionable to have bricks and mortal everywhere and that is why we are innovative in terms of the channels that we deployed the way we deployed them. The branches as a stand alone are actually a platform for distribution channels for us and it will help us to actually push agency banking, help us push our financial inclusion strategies, they are indeed the things we are looking forwards to and we have our presence in South-East and in the north.
Would Heritage Bank buy all the Subsidiaries?
Yes, all the subsidiaries that were not sold by AMCON, I did not know the ones that they sold, I know all the ones that we saw when we came in and all were part of what we bought when we came in. However by Central Bank regulations, if we are not going to be a Holding Company we have to spine them out. There is a time frame for us to do this, we will keep within these guidelines and sell them out as when due.
For me, no matter how much we are scared of naira dollar rates or inflation, we need an economy that is stimulated to do things, the oil price has gone down and our revenue is at a level that it has never been before. This is a very good time for us to organise ourselves to push things into the system that would make the economy to work, manufacturing, power, all of these things must work for banks to continue to be banks. And it is an economy that is driven by government whether we like it or not, the biggest contracts come from the government, revenue come from oil for government, so the banks depends on government money is not something that is unusual in this environment. My view is that it is a very good time for banks to be assisted based on the fact that a lot of money have been pulled out of the system.
I know Heritage bank to have passion for SMEs, what are your loan books like and what percentage of your loan book is dedicated to SMEs, tell me what you are doing concerning the agric sector and your projections for 2016, especially on lending to SMEs and agric?
Indeed we came in and discussed robustly on the need for SMEs to be our focus and the reasons are not far fetched, we believe that SMEs are the actual point for development in the country at large and having conversation that would make everybody begin to look towards that sector was important. For our loan books, before I push certain numbers out, I will need clarifications from our regulators but I can give the percentages. Our SMEs loan book as at today is about 18 per cent in value and in number is about 43 per cent, for agric is about 8 per cent in value and in number is about four per cent.
We intend to grow that number to be in the reverse where 60 per cent of our portfolio is in that market, but is a gradual process and we believe that by next year, given the board supports. We have clearly indicated that we have to go to the board, that is our focus, we need approval for a certain amount of money to be able to do this, that amount need to increase and if they do that, essentially, we might be hitting about 55 per cent in value and nearly 70 per cent in that space in terms of number, probably we can also grow our agric desk for which we are very focused.
Quite a number of partners have been giving us support in order to achieve 12 per cent market in our portfolio. We started a loan book at zero, if today our loan book is over N100 billion, it gives us a sense of where that could be even in agric that is about N50 billion would tell you what that would be. We do not want to aggressively go into loan book at this time, SMEs cuts across the whole economy, in oil and gas the numbers are much different, when it comes to those in the service sector, where a 3or 5 million would be enough and SME in the oil and gas would be about 50 million.
We have noticed a lot of banks going back to universal banking, there is a shift in the system, having been in the system for a long time, I want to know your thoughts as regards return to universal banking? Where do you have the greatest niche in the banking industry in terms of the area you want the banking public to say this is the area where this bank is heading, is it in SMEs, oil and gas, the moribund or real estate. We want to really know the drive of heritage bank?
On Universal banking, we have not gone back and no bank has actually gone back to universal banking. Essentially, we still remain commercial banks with different autorisations. But for some of us that are in the developmental phase where you are now transiting from one organisation to a merged organisation arrangement, of cause there are some legacy issues where those who have subsidiaries find it difficult to spin them off, you are not allowed to spend further capital on them so you cannot say you are running them essentially, you are mix merging them into transition and during that transition period, you can call yourself a universal bank that you are not. My personal thoughts on universal banking, competence is important and then commercial banks can stay in the commercial banking space, there are merchant bank that are technically fit to carry out merchant banking activities.
As a bank, we do not want to be seen and addressed as this is your niche, whenever people box you into a niche, it makes you believe that anything you do outside the niche is not alright. But we are a commercial bank entity and as a financial intermediation, we want to seen supporting the SMEs robustly at the retail sector.
We keep referring to heritage bank as a brand new bank, but I want to know, is there anything you need to do to remove the hang-on
We don’t call it baggies, we call it a legacy that is interesting– it is a prestige, if you can cast your mind back, SGBN was the first bank in Nigeria that pushed out innovative banking programmes.