READ THE : Banking industry environment: 2014 -2016 Challenges , Updates From: FCMB, GTBank, Skye and Diamond Bank(s)

Banking industry environment: 2014 -2016 Challenges

The continuing headwinds in the economy may be defining the sustenance of the resilience banks have demonstrated in their 2014 operations. A consecutive year of severe negative operating environment may end up signposting both 2015 and 2016 as seasons of locust after significant rises in performance indicators in the previous three years...


Much cannot be understood in the study of Nigeria’s banking industry in the last two years without the background provided by the first major regulator induced consolidation in the industry under Prof. Chukwuma Soludo led Central Bank of Nigeria, CBN, in 2004 – 2009.

lndustry analysts believe Soludo was set to build a better banking industry by share size in all respects especially capital base. By that the banks would be in better position to support economic development and less susceptible to the risks of bank failures, which had almost become the common phenomenon of Nigerian banks. Up until then banks were challenged with issues of persistent liquidity, poor asset quality and undetrcapitalisation. Banks also depended majorly on public sector deposits.

Soludo thus pursued vigorously the agenda of recapitalisation banks by increasing the minimum capital base from N2billion to N25 billion, an unprecedented 1150% jump.

Landmarks in the industry under the regime includes:

Elimination of fringe players and establishment of relatively bigger banking institutions with solid capital base.

Strengthening of regulation of the banking system thereby creating healthier banks

Establishment of a strong universal banking model which transformed most merchant banks into commercial banks with healthier competition.

Entrenchment of electronic banking including online transfers, Automated Teller Machine (ATM) and other interbank platforms.

Increased capital bases encouraged banks to diversify into many new products and services which further drew more customers into the financial system.

But many analysts believe the banks at this time were carried away by the euphoria of their sizes and balance sheets which grew astronomically post-capatilisation. The total assets of commercial banks in December 2006 (one year after consolidation) had grown by approximately 60% to N7.2 trillion from N4.5trillion. The huge resources soon found itself into bad businesses at the same time global financial crises was seeping into Nigeria. The combined effect was a bubble burst.


FCMB Group Plc consistent with good performance

FCMB Group Plc is one of the oldest private sector indigenous operators in Nigeria’s financial system in 1977 as City Securities Ltd (CSL). It then operated as a Stockbroker, Issuing House and Registrar. CSL gave birth to First City Merchant Bank Ltd in 1982. It converted to commercial banking trading as First City Monument Bank Ltd in 2001 and became a public company listed on the Nigerian Stock Exchange in 2004. Following Central Bank of Nigeria’s directives embedded in Regulation 3 of 2010, the bank in 2011 converted to a group structure.

Under this new arrangement, FCMB Plc became a private límited company and a subsidiary of the group, and same for CSL Trustees Ltd, FCMB Capital Markets Ltd, and CSL Stockbroker Ltd. FCMB Ltd (The Bank) is the group’s flagship with about 2.7 million customers, 3100 full time staff and 248 branches spread across the country. The bank is also a parent to FCMB (UK) Ltd and Credit Direct Ltd (a micro finance lender).

By the close of business in 2014, the Group operated with total assets valued N1.2 trillion haven grown by 16% in the preceding year. The Group had 523,442 shareholders out of which 345 were foreign investors


GTBANK Plc Continues to lead in earnings performance

In recent years the Annual General Meeting of Guaranty Trust Bank Plc have been a celebration of what remains the most profitable banking operation in Nigeria. This brand equity has been exported to make the bank a successful international brand. At present the number of foreign subsidiaries with the bank’s Group is 10 with total investment of about N40billion. GTB plans to continue with this growing trend in its global strategy.

Some few years ago, some researchers at the University of Lagos conducted a study to find out if certain corporate governance variables are significant predictors of bank performance in Nigeria. As part of the accompaniments of the research outcome, it was found that Guaranty Trust Bank came out top as one the best governed banks in Nigeria and this was significant in explaining the corresponding top rate performance achieved by the bank over the years.

Remarkably it has continued with this tradition of implementing best practice governance in areas of board composition and oversight, executive compensation, financial reporting, shareholder relations, corporate social responsibility, internal control, procedures and compliance. The Board is composed of very reputable and distinguished professionals including 2 key independent Directors. Three different Committees of the Board are instituted to make policies and oversight the risk Management function alone in a bid to ensure maximum integrity.

A system also exists whereby the control function is decentralized and attached to every business area to minimize incidences of transaction errors and malfeasance. This is complemented by a whistle blowing policy backed with an effective response system. The Board Risk Committee performs important duties of overseeing the operational risks function by ensuring that relevant policies are adequately complied with and that appropriate mitigants are in place.


SKYE bank Plc: Confronting costs in expansion

Skye Bank Plc started the business of banking as Prudent Merchant Bank Ltd in 1990. By 2000, it changed to Prudent Bank Ltd and became a Commercial Bank following approval by regulatory authorities. However, in 2006, during the Soludo-era banking consolidation, Skye Bank Plc emerged following a merger between Prudent Bank, Eko International Bank, Co-operative Bank, Reliance Bank and Bond Bank.

During the 2014, review year, Skye Bank continued its in-organic route to expansion through the acquisition of Mainstreet Bank, one of the Bridge Banks within the portfolio of Asset Management Company of Nigeria (AMCON). The acquisition was aimed at strengthening the bank’s retail presence nationally, wider market reach and enhanced economies of scale.

Skye Bank is a publicly listed entity with about 420,000 shareholders. It has three foreign subsidiaries operating in Guinea, Sierra Leone and the Gambia.

Perhaps in order to ensure that prompt and delightful services are available for customers, Skye Bank takes the issue of Information Technology very key in its operations.

In 2012, it adopted an ambitious IT Transformation Project which was completed in 2014 with a cut-over to the unique Flexible 12.0 Banking application.This Application has distinct transaction processing capabilities and is used in virtually every aspect of services delivery by the bank. Not surprisingly the Bank has consistently ranked high in the various performance metrics in the NIBSS payment.



DiamondXtra makes additional 15 millionaires

Diamond Bank Plc through its DiamondXtra season 8 has added fifteen Nigerians to the list of millionaires in the country. The millionaires emerged through a live draw in Lagos, which was witnessed by industry stakeholders, customers, potential customers, shareholders, journalists, the general public and the management of the Bank.

Thirteen of the winners won a million Naira each while one of the Bank’s customers won N2 million. The star prize of Salary4Life was carted away by Imoh Udoh in Akwa Ibom State, which entitles him to a monthly payment of N100, 000 for the next 20 years. Speaking, Aisha Ahmed, Divisional Head, Consumer and Privilege Banking stated that since the Bank initiated the special account, it has given its numerous customers the unique privilege to enjoy multiple benefits in one account.

“DiamondXtra was launched in 2008 to reward our loyal customers, both old and new. This event marks the first monthly draw of the new season to commemorate the launch of Season 8 and 15 lucky customers have emerged winners. The reward scheme is integrated into the DiamondXtra proposition so every customer on the DiamondXtra account has equal opportunity of winning through the transparent electronic draws. As we enter into the new season, we would like to reassure all our loyal customers that Diamond Bank will constantly seek robust platforms like this to enrich them.”

Corroborating, Osita Ede, Head, Mass Market Segment stated that the launch is a special feature of Season 8, with the introduction of regional quarterly draws to ensure winners emerge from every region in Nigeria including the North, South-East, South-South, Lagos and West.

“A total of 41 customers will be rewarded in each of the quarterly draws. This comprises 30 customers’ who will win N500, 000.00 each, 10 customers will take home N1, 000,000.00 and one grand lucky customer who will win a brand new SUV. Three special draws will also be held to celebrate various milestones during the year, in addition to the monthly and regional draws.”