OUR MANDATE IS TO BUILD, GROW AND REPOSITION ENTERPRISE BANK- AHMED KURU
•Ahmed Kuru
Enterprise Bank, formally, Spring Bank, is one of the three bridge banks given licence by the Central Bank of Nigeria (CBN) to operate as a money deposit bank. With about 1.5 million accounts and 153 branches, the bank also has total assets of about N280 billion. Recently, the Managing Director of the bank, Mr Ahmed Kuru, an experienced banker and a workaholic of sorts, bared his mind on plans to reposition the bank.
Kuru said the mandate he and his team were given was basically to reorganize the institution, provide the bank with all the necessary infrastructural support that is required for financial intermediation and also to prepare it for ultimate sell to the core investor.
Excerpts
CBN intervention in the banking industry
What the regulators have done is to ensure that the operations of 1.5 million depositors' of the bank continue with their business. Expectantly, we have about 4,200 workers, if they had not intervened, the employment of those workers would have been put in jeopardy. Also, there is an issue of systemic effect of allowing such an institution to go down, so, with those considerations, what they decided to do is to now provide a regulatory support because what we hear here now and then is that three banks have been nationalized.
We don't feel that it is nationalisation. What they did was to create bridges to take over the assets and liabilities of the dissolved three banks and, of course, once there is a bridge institution, it doesn't have to be government, even private equity holders can come and take over a bridge institution, recapitalise it, buy it and consequently sell it at a profit. Part of these institutions particularly our own institution when we came in, you remember in 2005 when there was consolidation in the industry, six banks which are African Continental Bank, Citizens International Bank, Guardian Express Bank, Omega Bank and Trans-International Bank came together and formed what was then known as Spring Bank. But since 2005 to 2011, there have been five managements because of issues to do with the consolidation, issues to do with merger, so, the CBN or the regulators felt that at this stage they need to take another step and then recapitalize the bank and prepare it for a richer core investor engagement.
So, when we came in, first of all, we were confronted with the issue of customer confidence, we were confronted with issues of liquidity, we were confronted with issue of staff morale, we were confronted with issue of infrastructural decay and we were confronted with issue of general perception in the industry. You know because we operate in an industry that is entirely based on trust, so, it is critical that you now have to rebuild the trust and then you reposition the bank.
And then, how do you rebuild the trust? People must see that you are repositioning the institution; you are providing the entire infrastructure that are necessary, you are motivating the staff and you are also keeping to your words. I mean those things that a typical banker is expected to do. So, the first thing we did was that we did a diagnostic report. And, we have also done a repeat and then in that repeat we decided that we should now form a new vision because it is a new bank.
Our new vision
We believe that we should be a preferred bank, anybody that comes to Enterprise Bank must come with the thinking that by the time you leave the bank, that you have a value addition to whatever that brought you into the institution, especially now that we have come out with a new mission statement that we are going to delight our customers with a highly motivated workforce. Actually, that is the core of what we are doing because to delight your customers you are going to be able to identify all those parameters that are very critical to customers and then create models around them to be able to deliver those values as being required by the customers.
Secondly, you would only be able to do that unless you have a highly motivated workforce because without experienced and motivated employees, there is no way that you can delight your customers. So, it is also important to us that we carry along a highly motivated workforce. Finally, for you to be able to delight your customers, communication also has to be used effectively. We must also use innovations. Innovations include technology, using also some of the financial products that are necessary to delight your customers etc. That now forms the bedrock of our mission statement. Of course, we have our core values, which are service, maintenance, innovation, integrity and professionalism. The core values now determine what we do, how we conduct ourselves etc.
Where we want to be
As an institution, where do we want to place ourselves in the industry? We are conscious of the fact that we are at the bottom of the ladder currently but one good thing that has happened to us is that with the recapitalization and funding by AMCON, if you pick the balance sheet of these bridge banks, you will see that we have the best balance sheet you can find in the industry because we have been able to clean up our books and also capitalized. Our total assets now is in excess of N280 billion. We have a total deposit of N160 billion, our shareholders fund is around N29 billion.
Our intention is to run a performance based organization, an organization that everybody will believe that professionals have taken. We want to be a customer friendly institution, so, we are going to leverage on technology and service as a basis of our competitiveness. We are not in the position to now start saying that I want to be number five in one year or two. For us, what is important is that we want to run an efficient organization, an organization that customers can come in and leave with a very good experience. So, we are going to leverage on a very good technology like I said and through the technology, we are going to make service as our bedrock.
So that technology and service will continuously be the basis for our competitiveness. Of course, we are going to look at all those issues. To show that in the final analysis, for every N1 that is invested into the institution, it is worth a very a high percentage of that N1. So, you are going to see a totally different institution, a medium sized financial institution that is driven by technology, that service is our key touch point and highly, highly motivated workforce because we intend to maintain our workers, the core aspect of banking, so that, they are properly positioned for our business.
Our mandate
You know, everybody is watching and we have as part of our mandate to prove that the bridge concept is much more better than a total liquidation because that would have been the option and that is why I said that if the bridge option happen in any other economy, private equity provider can even come and buy it but in this situation, we are very lucky we have AMCON. AMCON came in and dropped more than N111 billion into the system. They are able to clear the non-performing loans and ultimately also recapitalise the bank and the bank is operating professionally and commercially.
There is no any form of intervention from government because right from the beginning, it was very clear to us that we have to run commercially professional institution. And, if you look at the way even the executive committee was formed, the set up was clear, showing that they want to run these institutions professionally because these are their own creation, so, it is going to be a benchmark for other financial institutions in the industry. So, all the executive committee members, you see that they are all professionals. Most of them are even professionals in the industry and even the extended board members, those that were recently appointed by the CBN, most of them were former executive director and managing directors of financial institutions because the idea is to have an institution that is professionally run with proper corporate governance structure.
You know that was one of the problems of the banks before the regulators intervened. So, we have everything in place to ensure that we run a professional organization and for us that is our goal and that is what we intend to do. It is a private company but because there is government intervention, so, it is important that we are also accountable to the public. So we came out with our statement, we've opened our books, so that everybody can come and see what we are doing and then we defend our figures just like what is expected of any publicly quoted company.
So, we continue to leverage on your support and understanding. If there is any kind of clarification that is required, you are free to come to us, you are free to go to any of our outlets like I said although it is a private company but we intend to run it as a publicly quoted company because that is the only way we will be able to set the standard that is required by the regulators so that other financial institutions, other players in the industry would see that these banks that have been bridged have conducted themselves in the corporate governance requirement.
Our position in the industry
It is very important that I say that we intend to be a medium sized bank. We have about 153 branches. I am sure you have seen some of the balance sheets of some of these banks and if you relate the kind of resources they are using and the profitability they are generating, you can see that there is no efficiency. So, really if you talk about scale, you talk about the balance sheet size, the balance sheet size does not mean that you have a most efficient and profitable bank. So, what we intend to do is to deepen on efficiency but we have the scale. Everybody in this industry today will tell you that the future is retail business..
If you go to all the banks, their CEO will tell you that they want to be a retail bank, but if you measure their balance sheet, you will see that retail does not contribute up to 5 or 10 per cent of the bottom-line. And we know that for us to reach that bankable level we are talking about, we have to push the retail mandate but fortunately, the commercial aspect of it is very critical, that is the area that all of us can now play because that is the area that gives you quick returns and that is the area that also make it easy for you to cover the whole straight form of the market segment. Of course, you may still play high side; the corporate banking, the investment banking side but that you pick because now based on universal banking model, there are banks that specialized only on that beat, so, it may probably be difficult for you to compete with them on that side. So, you must also focus as to what segment of the market you want to play.
The cashless programme that is going on now is targeted at those retailing because they want to capture most of those people that are not in the banking arena to now come into the banking arena without necessarily coming into the banking halls to do their business.
For the bridge banks, whether we are here to maintain and sustain, no, that is not our mandate, our mandate is to build and grow and run it commercially as if nothing is going to happen. If you come to me today and say, you have N200 billion and want to buy Enterprise Bank, I will tell you that I am very sorry that, I don't have such mandate. I am here to run a bank, grow it commercially and position it along all other banks in the industry and make it qualitative and if at any point they decided that they want to sell it, that is not my mandate. My mandate is to grow and build the institution financially.
Profitability of our branches
Yes, we have about 1.5 million customers. Obviously, in any financial institution, you realize that not all 1.5 million accounts are operational. They do have the ones that are operational and the ones that are dormant. So, what we are trying to do everyday is to see how we can convert some of these dormant accounts into operational accounts and also at the same time we try to see how to bring new customers into the base. So, definitely, we've gotten new accounts but the first reality has always been, how do I operationalize all my 1.5 million accounts because you find that most of the companies you find in Nigeria today they all have accounts with us and they all have accounts with other banks. So, what we need now is to start visiting them and sharing with them your banking business, so that they can remove their accounts from dormancy into operational account. So, obviously the business is increasing.
No bank in the world not even Nigeria, will tell you that all the branches are profitable. Today, if you take a dimension of these new banks, you realize that maybe 40 per cent of the branches are providing 90 per cent of their profits but because of some requirements, there have to be a lot of locations not because of the benefit in that locations but because of what will happen in other locations. I can give an example, if you want to operate in the East and you don't have a branch in Alaba Market, you will be wasting your time because no trader will want to carry cash from Nnewi and start travelling to Alaba Market. So, Alaba Market may not even be profitable, you may not even have capital in Alaba Market but because of your business in Nnewi, you have to maintain your branch in Alaba Market and if you are a national bank, you must be present in all state capitals whether you are profitable in Abakiliki or not, you must have a branch in Abakiliki.
Staff situation
I think that in my opening remark, I did clarify that one of the main objectives of the intervention is to safeguard depositors interest and that has been made very clear by the regulators and I think that has been re-emphasize by us and I am not also aware of anybody that has been sacked because of this bridge arrangement. Nobody because legally there is no Spring Bank as a bank with a banking licence, there is a company incorporated with a banking licence called Enterprise Bank and all contractual agreement in terms of staff will now be migrated into the new bank, which means that you are going to carry on a new contract, which means you are going to carry a new Identity Card, which means there is going to be a change.
It is not a change of name; it is totally a new entity that acquired assets and some liabilities of a defunct entity. So, obviously, if the staff is migrating to the new entity, there must be new rules of engagement on the basis of the new entity and that was what we did and all of them were offered a letter of engagement and they were all incorporated into the new entity. So, there was no any job loss because that has been the objective of the government but for going forward, we are running a performance based entity, everybody must perform because it is very important because our mandate is to run the institution commercially and profitably and the staff is at the core of that mandate, that is why part of our mission statement is to ensure that, that aspect is captured for us to have a highly motivated workforce.
So, everybody that is working in Enterprise bank today has equal opportunity to prove himself or herself and the management, we have the obligation to train them, to provide the necessary tools for them, to create a conducive atmosphere for them to work in. After we do that, we now demand of them their performance because we intend to run a performance-based organization. So, to answer your question candidly, there will be no job loss, they are all part of us, we've issued them employment letters and they have signed new agreement.
Challenges
It is difficult to break from the past in a day but breaking from the past unfortunately is not in the event. The event that has happened to break from the past is that there is liquidation and there is a new institution. To that extent legally we have broken from the past legally. But, as we rightly observed, there are lots of challenges when you now look at all the other aspects of breaking up from the past. First of all, the customers you have to reassure them. In the last couple of years, there were issues like I explained earlier on, the former Spring Bank right from 2005 when the bank merged, now you have to reassure them, so that they don't feel that after one year or two years, I will now have to deal with another bank. So, that is the issue.
Two, you are also dealing with the workers that have been demoralized since 2005, so, you have to also work on their psychology, you have to work on their training and to re-assure them because over these period that they were in crisis, even attending to customers becomes a problem because if you are not motivated, it affects how you interact and relate with your customers, so, that is also a challenge.
Infrastructure challenge, if you go to some of our branches, some of them they don't even look like a bank because over a long period of time, there have been investment in terms of painting or rebranding some of those structures. So, you are changing your name, you are changing your stationary and then you talk about IT, you are changing your platform against which you drive some of the processes we are talking about.
So, there are many challenges and then you now talk about the service side, you have what we call service providers. Service providers are those that have been providing service for the banks in the last five or six years and because previously there were issues, they didn't come forward to make any claim from the institution, now they are coming up, that is a challenge. So, you are dealing with baskets of issues that have no direct relation on your day-to-day customer interface.
There are lots of challenges but I can assure you that, all the challenges are surmountable. We all have strategy around them and I think, we are making a very good progress. Our customers have started responding, they are comfortable that a lot of things have changed.
Legal issues
Whether I have seen a copy of the court order or not, I am aware of it, I think the whole process was to pass the following day appropriately. You see, law is a very interesting subject, the person that is standing outside this door, who is supposed to serve us, may decide that the way you entered this door, he didn't like it. He can go to the court, the court will listen to him, and it will hear him. Either way, you will go and look for a lawyer and defend yourself, to prove that this is the way he entered the room.
He has a right to say he doesn't like the way you entered this room but if he goes to court, unfortunately for you, you must look for a lawyer to go and defend yourself that actually you opened the door the way you are supposed to open it and you entered because you are invited by Enterprise Bank. Ultimately, the truth will prevail because you entered the room appropriately. So, legally, anybody has right to go and put claim whichever way or manner he or she wishes but we do believe that, there is nothing in the process that is illegal and nothing that has been tested. And, I do know that you see more of those but it is finally left for those who have responsibility to look after this, to ensure that whatever decision that is taken is taken in a manner that will not obstruct business.
Giving farmers and manufacturers access to loans
There are so many issues around it. In a country where you are trying to control inflation, where you are trying to control exchange rate, obviously something must give. And one of the casualties is the interest rate, particularly if you want to maintain price stability. So, unfortunately if you want to drive production, you have to work on the interest rate but unless you have price stability, you are not going to stabilise industrial growth because we are an import dependent country.
So, we all have to be careful as to how we manage the interest rate because where you also have excess liquidity in the market, you also have to regulate. So, you see that now both the CBN, the federal government, Bank of Industry, everybody is looking after the small scale and the localized industry. All these funds are mostly under the retail banking but all the challenge we are having now is the issue of skill because even those small capital enterprises, they don't know how to approach a bank to access credit because if you remember more than 15 or 30 years ago, banks were mandated to keep certain percentage of their profits into the bank where they use it to fund small scale endeavours, but hardly you find a bank that has been able to do that.