By Omoh Gabriel
Two weeks ago MD/CEO of Enterprise Bank Limited (EBL) Ahmed Kuru, had a breakfast meeting with Business Editors. Issues relating to the function of a bridge bank, what the new management intends for the bank and the challenges facing the bank in its attempt to break from the past were raised.
Excerpts of the meeting
We want to know the managerial and business philosophy that you will be bringing into this bank to achieve your aims and objectives? What did you observe in the style of your predecessor and what led to the shortcomings and how do you intend to work on these challenges to succeed?
They are totally different situation. They were handed over an insolvent bank, while we were given a highly capitalized financial institution. While our mandate is to run the institution commercially and profitability, they were mere caretakers preoccupied with preparing the institution for recapitalization and at the same time sustaining the business. Personally, I think they have done very well given the hostile circumstance under which they operated. You know banking is a business of trust. To sustain trust under an unstable economic environment with competition wanting to eat you alive, requires strong frame of mind. They had liquidity, legacy, shareholder, employee and brand challenges.
With a strong balance sheet and professional management team we are poised to create the kind of model institution desired by the regulators and our shareholder. And we intend to do that. Part of current challenge is getting skilled workers to blend with our existing resilient workers to create a formidable team. Because this is people business. If you don’t have good and experienced hands you can’t make it! Therefore our strategy is to attract and retain talent. We have been talking about corporate governance and now we have the opportunity to demonstrate it ourselves.
Have you seen a copy of the court order restraining Enterprise Bank from dealing in the assets, businesses and subsidiaries which are purported to have been transferred to your bank from the former bank? What happens to the original investors before nationalization and the legal battles?
Whether I have seen a copy of the court order or not, I think is not important at this material time. Yes, I am aware of it but I also think the whole process was appropriately handled subsequently. I think it was a case of misinterpreting a judgement. The law is a very interesting subject. So, legally anybody has the right to put up a claim in whatever way and manner he or she wishes as provided in our constitution, but we do believe that there is nothing in the process of taking over of the bank that is illegal. However, it is finally left for those that have responsibility to look after these things to ensure that whatever decision is taken is in the manner that will not obstruct business. For us our mandate is to manage the institution commercially and that is precisely what we are trying to do. There are structures within this framework that are appropriately positions to handle other incidental matters.
What are you going to tell your customers about the bank?
First we will tell them what other banks are telling them; we are here for good and good business. We are a customer-centric organization. We want to understand what they want. Before we came in, because of the situation that I highlighted earlier, even lending was a challenge due to liquidity and infrastructural issues. So now we have to tell our customers that we are back to business and we are back to business for good. We are in a position to attend to all their banking needs. We are efficient and responsive. Our core values are service excellence, professionalism, innovation, integrity and work as a team of highly motivated service providers. Again, we have to understand what they want and develop our response around their needs. Most importantly we keep to our words.
We are back in business and this time around we are back for the long haul. The mandate from our owners, like I said earlier, is to run the institution commercially and profitably. And our intention is to ensure that we leverage service and technology to create competitive advantage. Our vision is to be a bank for value creation.
As a bridge bank, people expect you are there to maintain and sustain rather than to build and grow and that will affect how they relate to the organisation, how do you deal with the reality on a day-to- day basis of being a bridge Bank?
As for whether the bridge banks are here only to maintain and sustain the organisations, I say no. That is not our mandate. Our mandate is to build, grow and run the banks commercially as if nothing is going to happen. If you come to me today with N200 billion with intention of acquiring Enterprise Bank, I will tell you I am very sorry I do not have such a mandate. What I am here to do is to run Enterprise Bank commercially, grow, position it alongside other banks in the industry and make it competitive. In the final analysis, if at any point my principals decide that they want to sell their okay but that is not my mandate. Our mandate is to grow, build and add value to the institution.
You said Enterprise Bank has 1.5 million depositors. Now with the change in the bank, has the number of depositors decreased?
We have about 1.5 million customers. Obviously, in any financial institution, you will realise that not all accounts are operational. You would have a percentage that is operational and another fraction that is not. So, what we try to do is to see how we can convert some of the dormant accounts into operational accounts and at the same time try to get new customers. Definitely, you may have gotten new accounts but the first priority will always be how you can make all the accounts operational. You will find that most of the companies in Nigeria today have accounts with us and other banks as well. What you need to do is to start visiting them and assuring them that you are back in business so that they can make their accounts active again. It also gives you the opportunity to understand the current state of their business to enable you tailor your products to meet identified requirement. To answer your other question directly, the business is obviously increasing.
You said you would be a medium sized financial institution, given the dynamics of the industry where scale and size are much more imperative to compete, how does that work out for you?
Agreed, scale is very important; we still intend to be medium sized bank.With 153 branches, by any standard that is scale. I am sure when you are talking about scale you may be referring to the size of balance sheet. A large balance sheet size does not necessarily mean you have the most efficient and profitable bank. So what we intend to do is to leverage efficiency to create the type of scale you are talking about, but we have scale. Everybody in this industry today will tell you that the future is retail business. But retail does not bring money today. It is for the long haul. Most of the banks will tell you they want to be retail banks. But when you scrutinize their balance sheets, you will see that retail does not contribute more than 5 to 10 per cent to the bottom-line. However, for us to reach the un-banked as we all desire, we have to keep pushing at the retail banking end. Nevertheless, the commercial segment is very crucial and is the area that all of us are now playing in, because it is also the area that gives you quick returns and makes it easy for you to cover the whole spectrum of the market segments.
Of course, there is also the high end which is also known as the up-finance banking segment, which is the corporate and investment banking. Based on the universal banking model, there are banks that are playing in that beat alone. For some of us it is important to maintain presence in that segment also in order to follow the value chain. But you must focus on the segment of the market you want to play in. Every bank in Nigeria, besides those that are playing in the up finance banking segment, will tell you that the retail business is what they are targeting and that informs the recent acquisitions and mergers we witnessing in the industry.
Also, the cashless project, which is the policy that will limit daily cash transactions for individual and corporate customers to N150, 000 and N1million respectively, starting January 1 with Lagos State as the pilot is all targeted towards deepening retail banking. The policy is aimed at encouraging banking culture targeting most of the people that are yet to begin to keep their money in the banking arena without them necessarily coming into the banking halls for their transactions.
Are all of your 153 branches nationwide profitable and you intending to close those that are not profitable?
With every sense of responsibility, it is not usual to find all branches of banks profitable. Typically the 20:80 rule applies. 20% of branches providing 80% of the corporate profit.But because of some synergic benefit you have to be in a lot of locations, not because of the viability of those locations, but because of benefits derivable from other locations. For instance, if you want to operate in the East and you don’t have a branch in Alaba Market, you are wasting your time. This is because the Igbo trader may not want to carry cash from Nnewi to Alaba Market. So Alaba Market may not be profitable; you may not even have a customer in Alaba Market but because of the business in Nnewi you have to maintain your branch in Alaba. If you want to be a national bank also it is expected that you would have your operation in all the state capitals. To answer your question, no, not all the branches are profitable and it is not unusual.
What happened to the workers that have been in Spring Bank? Have they been inherited by the present bank? Are these workers expecting any payoffs or have they been integrated?
In my opening remarks, I did clarify that one of the main objectives of the intervention is to safeguard employment and that has been made very clear by the regulators and it has been re-emphasised by us. I am not also aware of anybody that has been sacked because of the bridged bank arrangement. Legally, there is no operating bank called Spring Bank in existence with a license. The new bank has given employment to all the workers of the defunct Spring Bank under new terms and condition in line with industry practice. It is not just a change of name; the bank is now totally a new entity that acquired the assets and liabilities of a defunct entity. So obviously if the staff is migrating to a new entity, there must be new rules of engagement on the basis of the new entity and that is what we did and all of them were offered letters of engagement and they were all incorporated into the new entity. So, there is no job loss at all because it has been the objective of Government that no one should lose his or her job. Nevertheless, going forward, you are running a performance based entity. Everybody must perform. It is very important. Our mandate is to run the institution commercially and profitably. We intend to do that and the staff is at the core of that mandate. That is why part of our mission statement captures that aspect. We want to have a highly motivated workforce.
So everybody that is working in Enterprise Bank today has equal opportunity to prove him or herself and as management, we have the obligation to train them, provide the necessary tool and create the conducive atmosphere for them to perform. After we do that, we now demand of them performance because we intend to run a performance based organisation. There is no job loss. They are all part of us. It is a continuation and every staff has been integrated into one big family.
You said in your statement that one of the mandates of the bank is to break from the past, have you achieved that? What are the challenges of trying to achieve that and of course I see that your bank is the most aggressive of the three nationalised banks, how acceptable is your bank to Nigerians?
It is always difficult to break from the past, as breaking from the past totally requires more than one action or event, rather, a combination of actions and activities. The event that has necessitated a break from the past is that there was liquidation and there is a new bank and new administration. But there are lots of challenges you face when you want to break from the past that includes people, culture, customers, processes, branding, ownership etc. Two most important are people related; customer and staff. First of all you must reassure your customers that all is well through ways and means they can easily identify with. It is necessary to do so because right from the time of the merger that produced the defunct Spring Bank in 2006, there have been issues. So you have to assure them that it is now a new bank with service excellence as our core value.
Secondly, as the customer reassurance needs to be done by the staff who, themselves have been de-motivated and demoralized since 2006 due to one crises or the other, you have to also work on their psychology, motivation and training. They need to be reassured also. Otherwise attending to customers becomes a problem. The reason being that if you are not motivated, it affects how you interact, interface and relate with a customers. We require total cultural reorientation. Next important is the internal and external rebranding. It is a huge exercise that comes with huge cost! It involves branch ambiance, media engagements, attitude, tools, stationeries, personal identification tools etc. Then you have to change the platform on which you drive most of these processes you are talking about. There are so many challenges indeed. On the other side too, you have service providers. These are people who have provided services to the bank in the last five or six years and because there were issues at the time, they did not come forward to make any claim on the institution. Suddenly, there is a new healthy institution and then all kinds of claims begin to surface. This is a challenge because it directly impact on your capital. You also have litigations from those who feel that they still have issues to settle. You find that you are dealing with past issues in more measures than current developmental issues. And all these have direct correlation to your day-to-day customer interface. What matters to the customer is to transact his business efficiently through appropriate channels.
So you have to prioritise. I assure you that all the challenges are surmountable. We have strategies in place to handle these challenges and I think we are making very good progress. I also think our customers have started responding. They are comfortable that we mean what we are saying because to us it is important that whatever we say, we do it as we have said it. So, there is no challenge that we have seen so far that cannot be tackled and we are tackling all of them. The last couple of months has been a period of evaluation for us. The year, 2012, is going to be our leap year, because we would have every issue in proper perspective, whether people, technology or process.
There are basically two major expectations of banks globally. These are that they should grant low interest rates and finance small and medium enterprises and Agriculture. How is Enterprise Bank dealing with these? Nigeria currently has a population of close to 167 million and 60% of that population is made up of the youths; that means you have a potential; a fresh opportunity on this segment, how do you intend to leverage this?
The Central Bank of Nigeria is determined in becoming a catalyst in economic growth. They have initiated many interventions in the real sectors of the economy particularly in the manufacturing and agricultural sectors. Particularly, the CBN Governor is very passionate about this. It is agreed that once you have the right strategy in these two sectors and you are able to fix power, employment could be generated in an unprecedented manner. The economy of major industrialized countries of the world is being driven by the small and medium firms and businesses. And that is why most banks are targeting the retail business. If we don’t manage inflation and exchange rate properly by encouraging production and local content enforcement, cost of doing business will continue to be high without appropriate value creation. As a country we have no option than to give agriculture and other small businesses that have easy “points of entry” for majority of our people priority attention. Big businessese alone cannot turn the economy of a nation where majority of the people are not engaged. We need to build capacity and expose our people on how to approach credit. CBN is doing a lot in this regard but banks need to, as a matter of deliberate policy, build capacity of the small businessman and woman on how to interact with financial institutions
So, everybody is aware today that for us to move our economy forward, we have to pay a lot of attention to the small scale and agro-allied industries and from what I have seen, all hands are on deck to see that we achieve those mandates. The youth must be empowered by creating employment opportunities for them. All our retail and credit products are being designed to fund the opportunities and sustainability.