We'll Be Among Three Biggest Banks - Aderinokun
As the Guaranty Trust Bank public offer opened last week, many analysts have commented on the fact that the shares on offer would be over subscribed. Their argument is that a diligent look at the bank's figures showed it has a track record of great financial performance and consistent high returns on investment which have been obvious and admirable. The Chief Executive of the bank, Mr. Tayo Aderinokun, explained that the proceeds from the public offer would be channeled towards providing a world class banking service in Nigeria while, on the long run, it aims to be among the three biggest banks in Nigeria. He spoke to Samuel Famakinwa and Enitar Ugwu
Could you give us your overall assessment of the Nigerian economy?
It could be better. I believe that the potentials of Nigeria are actually not being utilised to the maximum. Maximum is even pushing it, let's talk of optimum. Given the resources which we have, I think it should be harnessed towards better returns. I just come back from China and what China has done in the last ten to fifteen years is phenomenal and it shows that with the right leadership and energy been channeled into the right directions, these things can happen. Nigeria does not have to remain as a third world country. China was a third world country. Even as late as the 90's, China was still very backward, but today, I will say China is very close to first world. I will say the way things are going, in the next twenty years, China will probably become the largest economy in the world. And all happened within ten, fifteen years. My view is that we need to support government because the less government we have running the economy, the more vibrancy we see in the economy. And why I even say less government was because part of the problems of the country is that the resources of the nation, the bulk of the resources of the nation are in the hands of government and that is why government feels they have to do everything. They have to cater for education, cater for healthcare, roads, transportation, etc. If not, some of them could be let go. If you can empower the private sector, then I think in the end, it can always be better for the economy. You would see what has happened in the telecoms sector. In two years, from less than 600,000 telephone lines, we now have over 4 million and it happened naturally without the intervention of government. It shows that the private sector can get things done, can get things moving and I think the direction should be towards that.
The banking industry had been deregulated for some time now but some people argue that banks are declaring huge profits while the economy is not growing. How do you justify this?
Well, I'm not sure about banks declaring huge profits while the economy is not growing. There are 90 banks in Nigeria, how many are declaring huge profits? Maybe ten and what you consider huge is a relative term. Any business once it is properly run should make money. So, well run banks are making money. But there are about 70 or 80 banks that are neither here nor there. So, let's not generalise about banks which are making money. Good banks are making money. Not so good banks are not making money and that is in the majority. You see banking is also a peculiar business. If you run it properly, you can make money on both sides of the balance sheet, that is, what we call the liability side and the asset side. If the economy is booming, it gives you room to make profit on that side. If the economy is stagnant, people keep idle balances with a bank and you also make money again because you can then invest in government papers, for example. Really, if you run a good bank, in good and bad times, you should do reasonably well. Because in the end, banking is just about depositing people's wealth and while that wealth is being warehoused for investment, you still make some money and while it is being invested you will also make money.
Let us explore the issue of good banks and not too good banks. Charles Soludo has raised the issue of encouraging banks to look at the mergers option. Do you think this can work in Nigeria?
It's a good idea, but if you look at the peculiar situation of Nigerians and Nigerian banks, a lot of them are owned by people who see it as a family business. Honestly, there are quite a number of them. So, the reason for investment in the bank in the first place might not necessary be to make profit, it goes beyond that. People like this idea of I'm a managing director. I have protocol that takes me to the airport, etc., all those little things matter to some people. If they merged, those benefits will not be available to some of the owners of these small banks and I think it's very difficult now for people to accept. This is a major factor that would hinder these mergers and acquisition thing. So, if you add that with bad you will only get something that is worse. Now, the owner of a good bank, why does he also want to dilute his own franchise by adding on problems? Personally for me, I think it's easier to start afresh. Let me use an analogy, it's like if you want to build a house, it is better to start from a bare land and you do your foundation and build the house. But, if you bought an existing house and you have to demolish it, it takes longer. So, buying a bank now that is in distress or that is not too sound is not exactly the best of situations, you are better off starting a fresh bank than buying one because you first have to solve it's problems especially if it's the one that has a hole, you first need to block the hole before you start building upon that. This is another major factor why you might not see mergers and acquisition work very soon. There are a few interesting combinations that may happen. Maybe a retail bank merging with a good investment bank to create an institution that will be a total universal bank. Those kind of opportunities are there. But again, personalities stand in the way of most of these things. So, it's not really going to be easy. It's desirable but again you have to really look closely, it's not something that anybody should just jump into because of merger sake, it should not be so.
There are two schools of thoughts now about the number of banks we have in Nigeria some are of the view that Nigeria is over banked while some are feeling that if we still have about a hundred more nothing is wrong. What's your view about this?
My view is that Nigeria is not over-banked. Definitely not over-banked. Statistics show that we have a population of about 120 million people and we have just a hundred banks, I mean close to a hundred banks, I'm not sure we have up to a hundred banks now and with total number of branches of less than 1500 among all the hundred banks put together. Let's look at the US for instance which has a population of 350 million. The US has over 1,000 banks. So, there's still a lot here. Today, when we will start seeing real competition in the Nigerian banking industry, I think we need 300 to 400 banks. But still they should not be the kind of banks are not serious, they should be serious banks. You see, I really don't want to be controversial but most of the banks we have today are just boutiques and are all in Lagos. Maybe what we need is some form of regional banking just as we have licenses for telecoms operators that are restricted to certain areas, maybe we start licensing banks that are restricted to certain areas then we can start seeing market penetration. If a bank for instance is restricted to only Akwa-Ibom State and you can only do business there, the only way which it can grow is for it to actually penetrate, develop the banking business in that area both on maintaining bank accounts for people and then also develop the trade and business part. Then, each State should be able to accommodate at least five banks that would not do anything other than be in that State, then we will start seeing some competition.
Do you think that is quite possible in Nigeria considering the fact that everybody wants to be in Lagos, like you rightly noted?
There's no reason why everybody should be in Lagos. If you want to have a banking licence in Lagos you buy a banking licence in Lagos. But, you only operate in Lagos. If you want a banking licence in Borno State, good. You will get one for Borno State. Maybe the capital requirement will be different. Things will happen naturally.
We could say the same thing about telecoms, they have issued, I think, about thirty-six telecoms licenses and it's regional. You will only operate in these areas. There could be national banks just as in the US now there are national banks. Even the smaller State banks can still do business nationally through correspondent banking relationships with the national banks, but their main area of focus will be where they are. They tried to do something like that using the community bank, but the focus of that one is slightly different and the level of professionalism in the community bank is not really high enough to get us where I think we need to get to. Honestly, a thousand bank in Nigeria is not much.
The Central Bank of Nigeria tends to be getting worried about insider abuse in banks and has even invited bank chairmen to the Bankers' Committee meeting. What will be your advice?
Maybe there's cause for worry but I think things are getting better in that area. The possible reason that they will call bank chairmen to come is that usually in most banks, chairmen seem to have a lot of influence and control over what happens. Maybe it's just a forum to get them to at least know about the new direction that the new Governor wants to pursue. Honestly, I don't see anything ordinary in that area. Insider abuse I think is improving because ten years ago it was worse, those were the days when there was so many new banks most of them being run by non-professionals and where the owners and or chairmen had a lot of interest. I think the situation is much different today.
CBN has also been so worried about one person being chairman and chief executive of banks. If you take the example of the United States, it's not an issue, so why is it an issue here or is there not something we could do and ensure proper distribution of powers?
I don't think titles really are the issues. Whether you call somebody a chairman or call him an MD. The fear is that if you divide the role of chairman and managing director, there's some form of separation of powers. There are instances where actually the MD is the one who actually nominates the chairman. In reality we should be careful about using titles as a basis for determining who is controlling a bank. It's true that separation of powers is good because power corrupts and if you have absolute power, the tendency is that it corrupts absolutely. In general terms, it's good that we should have separation of powers. There should be a check on anybody and in that regard I will say the new focus is in the right direction and it's in good corporate governance. But, honestly in the higher analysis, it depends on who is running an organisation or how he intends or how the people pursue their philosophy. What do they intend to achieve? We can only make laws but we can't police people hundred per cent. So, what we should try and do in the long run is move to change the psyche of people who manage the organisation, the people who own the organisation such that we all know that it is in the best interest of the system for even the organisations themselves to have a good standard corporate governance. In the end, it is better for the organisation because the organisation will leave longer, it's a long run game.
What do you think of the Sanusi years and what do you expect to see of Soludo?
Sanusi did a wonderful job. He was a very courageous man. I honestly believe that the things he did, the reforms he brought to the system, the sanitisation of the industry, only somebody like him could have done it. Somebody who was also part of the system who knows where the figures are buried and who knows what should be. He is a courageous man, he is an outstanding banker by all standards really and he is a fine person. Very nice to me as a person and this organisation that I work in.
Soludo is coming at a different time so he's going to face a different challenge. I think we have seen the end of an era in Sanusi and my reading is that the Soludo years will see central banking as more macro-managing. It would not be a central bank that was micro-managing anymore. It won't be all about banking supervision. We are going to see a central bank that is broader in it's management and that see a wider perspective. wider perspective in terms of larger economy and will see the role of monetary policy and how it can aid fiscal policy on the other side. I think that is the flavour Soludo is going to bring in. So, you will see less of banks are doing this, banks are doing that.
For GTB, it's been good so far. Do you think there are things people should learn from the GTB experience?
What I say when people ask me what is the reason for the smooth success is that we worked harder than other people. And working harder doesn't necessarily mean that we sleep here in the office. We are focused. We work smarter. We know what we want to do and we are focused. There are very little distractions. In several organisations, people used a larger proportion of their time doing what doesn't really add value to the business. What we try to do is to remove most of the extraneous things that distract people and we spent nights ahead our time working towards the objectives of the organisation itself. There very little distractions, there's hardly any politics. you come here and do your work and concentrate. We are professionals. We are broken down along industry lines, regional lines and every unit has their business to manage and they manage it both on the balance sheet perspective and the profit and loss perspectives. I think it's just that we are focused and the fact that we work hard that is responsible and not any magic.
Where are you taking GTB to by way of your current public offer?
Well, we are trying to be a big bank.
You are not yet big?
Well, we are big, but we are trying to be a bigger bank. We want to be in the league of what we traditionally call the big banks in Nigeria. First Bank, Union Bank, UBA are still the largest. It is our ambition to enter that league as soon as possible. We have a plan over the next five years to do advanced network because it is quite important to also enable our technology because we don't intend to have 300 branches like First Bank. Even if we wanted to, I don't think it will make sense in this age because a lot of the things which they have these branches for, we can do with technology. We will still be investing heavily on technology to support that expansion in our branch network. We also have an ambition of being a regional bank. We've started. We are starting with Anglophone West Africa. We are in the Gambia, we are in Sierra-Leone, we hope to go to one or two other countries in this our plan period. Overall, we intend to solidify our base in Nigeria and also try to be relevant on the West African coast. After that who knows, we will take on Africa and some day it could be the world. Citibank started out 200 years ago by somebody or a set of people and today it's a world known bank. But the more interesting one is HSBC. HSBC in the last ten to fifteen years has made itself a world bank. It was relatively an inward looking Hong-Kong bank until fifteen years ago and what it has done is tremendous. So, if the Asian can do it, who says some day, somewhere, I don't say it should be me because there'll be generations of Guaranty Trust Bank that are coming that could do it and that is the foundation we are laying. We are trying to build an institution, something that will out-live we the founders. We are laying that ground work. You've seen the first succession, in another period I will move on so that other people will take on. We've built a foundation and we are putting all the building blocks in place to ensure that this institution will continue long, long after.
Let's look at the role of technology in this whole picture. GTB pioneered online real time banking in Nigeria, you have investments in Valucard, Interswitch and would soon begin to issue for Mastercard. What would you say is exactly going to be your focus. Are you going to look at one platform or a series of platforms?
You see, what we are trying to do is allow our customer to access the bank from any channel that is convenient for him or her. If you want to use your mobile phone, you can access GTB using your mobile phone and if you want to use an ATM to be able to access your account, you use an ATM. If your objective is Internet, you want to use your PC, you will be able to access your account with your PC. It is called anytime anywhere banking. If you want to do it at the middle of the night, you are free and if you want to come to the traditional banking hall because some people still feel more comfortable coming in and actually talking to other individuals, that access is also there. That's why we have physical branches. Right now the state of technology in Nigeria is still in flux, there are no standards yet. We have to keep picking bits and pieces here. We believe that over time, dominant standards will emerge and at that time we will all fall in line but that's still in the future. Today, we must do whatever is available, different vendors on different platforms. What we are doing is to make sure we have a leg in all the emerging platforms so that whoever wins, we will be there. That's really our own objectives.
Looking at the performance of the Banking sector at the Nigerian Stock Exchange, do you think there are investible funds?
I think generally that the Stock Exchange has come to boom. There are a lot more investible funds that are going to come in and the availability of good outlay. Apart from the banking stock, breweries and the conglomerates, honestly, there's not really too much happening. You know with this pension reforms in the economy, it's going to throw out a lot of money. It's going to make available a lot of long term money. Where is that money going to go. The natural way is the stock market first. So much more money is chasing the limited amount of stock available. So, anyone investing now, honestly, it's a good time to invest.
We are looking at the fact that GTB is coming up at the same time as Zenith Bank.
I really would not want to comment on this because I know they have reasons why they are coming to the market now. But one thing I can say is that our year ended February 28, 2004 and we are using a full year audited report to come to the market while Zenith is using a nine months interim report.
What is your dream for GTB?
I will feel fulfilled if by the time I leave GTB it is one of the three biggest banks in the country.
How do you relax?
I read, of course, and I exercise.
What is the GTB culture?
You know it's not just one person, it's a team. We do it all together essentially. For instance, our credit committee, it's an open place, we fight, we disagree but when we reach a decision then everybody abides with that decision. That's how we go.
Investigations showed that decision taking at GTB is not bureaucratic as a lot more people are trusted with decision taking and this has worked well for GTB. How did you do it?
If you empower people, you should also give them the resources to be able to make right decisions. If people are not properly trained and are not exposed, if you ask them to take decisions, of course, they are going to make mistakes. So, it depends on the way you structure the organisation and the kind of people you use. At times, it could be the reason decision making is concentrated in one person in some organisations because the other people don't have the capacity to take the decision because they have not been empowered. They don't have the requisite knowledge, skills to make decisions. What we do is to create people in every area that can do the job for which they are employed to do. Once somebody is properly trained, has the exposure and the technology to do it, leave them to do it. It is by only allowing the person to do it and make mistakes that he becomes learned because one person cannot do it all. If one person tries to do it, he will only be limiting the talent of the organisation.
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