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FCMB CEO, Ladi Balogun Speaks On The Bank's Growth Strategy


Mr. Ladi Balogun is the Chief Executive Officer of FCMB Group Plc, the Nigerian lender that acquired bailed out FinBank Plc about three years ago.

He responded to a few questions via email.
Q: As the bank intends to have 4 million customers by 2016, what is the number at present?

A: At present, we have 2.5million customers, we currently acquire about 50,000 customers every month, that's about 600,000 new accounts every year. As we continue to accelerate the development of our retail franchaise, we project that by 2016, our customer base will increase to 4 million. There is a big opportunity in retail, with just about 20 million bank accounts in a population of 170 people, with little effort, we can grow our customer base quite quickly. There will be a heightened focus on our customer experience and reliability of our alternate channels to support this growth.

Q: What is the bank's percentage loan growth target for this year?

A. We are looking to grow our loan portfolio by about 20% to roughly N540b this year. Our loan to deposit ratio right now is in the early 60s and we are going to leverage that further.

Q. Which sectors/industries will take lions' share of loans?

A. We project our most significant growth to come from the retail Segment. We have defined retail as purely individuals. In the short timeframe that we have been in retail banking, we have grown to become the largest consumer lender in Nigeria. We currently distribute about 25,000 personal loans every month, with consumer lending representing about 20% of our entire loan book. Our current growth rate on the personal loan book is about 35% to 40% year on year, so we expect that pretty quickly, we will probably get to about 40% of our loan book being personal lending. We will remain focused in this area, while attending to further growth from SME, Corporate and Government.

Q. What loan deals/transactions does the bank have in the pipeline for this year and next?

A. In order to mitigate credit risk as much as possible, our focus is not primarily on large deals but on diversified loan growth. Our diversification strategy considers industry, geography, customer and company size. We currenly have a healthy loan pipeline from various industries and sectors.

Q. What is the ROA/ROE target of the bank for 2014 and what was it in 2013?

A. We attained 13% ROE in 2013, and our target for this year is 15%. We expect to continue improving steadily and cross 20% in 2016 and attain a cost to income ratio below 55%. We believe this target is achievable as we continue to accelerate the development of our retail franchise, increase our customer base, grow our retail loans where we have competitive strength, improve capital efficiency, and keep our costs under control.

Q. What strategies does the bank have in place to mitigate losses due to regulations?

A. A great deal of focus will go towards cost management: cost of risk, operating expenses and cost of capital. We will ensure that we migrate more customers towards alternate channels with lower cost to serve and healthy fee income generation. Finally we are giving increased attention to cross sell ratio's with the aim that we average 3 products per customers. This will improve profitability of every customer. We are confident that with these in place we should be able to offset the impact of regulatory costs.

Q. Any plans to raise dollar loans or Eurobond and if so when?

A. Dollar fund raising is an important part of our liability strategy, especially as we are active lenders in the resources space (not only traditional oil and gas financing, but also solid minerals and structured commodity finance). Our preferred source of funding has been the loan markets as opposed to bond markets due to more stable pricing. We expect to raise about $300 million from the loan markets. Should market conditions be favourable we might also consider the Eurobond markets.

The future remains bright. In 2013, we reported improved earnings growth, we maintained a strong balance sheet and credit standing, we also exhibited abundant liquidity and a robust capital base to support future business growth. As we look into the future, we remain committed to delivering improved financial performance and enhance shareholder value sustainably in the medium to long term.