Okonkwo: Bank Debtors Can No Longer Act with Impunity
Managing Director, Fidelity Bank Plc, Mr. Nnamdi Okonkwo, in this interview with Festus Akanbi, spoke on the ongoing crackdown on banks’ chronic debtors, saying the era of impunity is over
You had very impressive earnings in 2014, how did the turnaround in the bank’s results happen? Before I comment on how this turn around happened, I think it is important to understand the soft drivers and the hard drivers. The soft drivers in the sense that our background should be taken into account. I am the third chief executive officer of Fidelity Bank in 26 years. This bank had a merchant banking background and was well managed and professionally run and was perceived as conservative. So, when I joined and became CEO in January last year, I inherited a stable and well capitalised bank and the directors knew we had a good business in our hands, the shareholders as well, but there were expectations. They wanted us to take the bank to a higher level, while not forgetting where we were coming from. So, we sat down, strategised and decided the sectors we were going to attack and the type of business we were to slow down on and more importantly, a key requirement was that we needed to revamp or re-tool our performance culture. So, the soft drivers are capitalizing on our rich pedigree, service excellence and taking advantage of our deep play in corporate banking as well as SME banking which my predecessor had already started before he left.
Seems you are pushing hard on SME banking?
Yes, but not forgetting where we are coming from because we are quite strong in corporate banking. If you look at our loan growth, you will see that corporate banking contributed a lot. Now, the hard drivers of our performance, we recorded 26 per cent growth in our loan book. Our average yield on loans improved by about one per cent. Now, there was a decline in cost of funds and this was because of our deepened play in the SME and retail sector where we were able to mobilise low cost deposits in our activities rather than just taking priced funds. For the first time in the history of the bank, our savings account hit N100 billion and it is still growing. Our cost of risk normalised at 0.9 per cent. Now, cost discipline itself made sure we did not rise at the rate we rose in 2013, so we still kept our cost below inflation.
One of the issues raised at the last bankers’ committee was the plan to name and shame serial debtors, how can the banks collaborate to bring down the level of NPLs?
Let me correct an impression. There is no alarm, it is not as if NPLs are rising and so everybody had to rise up to fight it. But there are reasons NPLs increase. Our focus at the bankers committee was more collaborative with the general direction of the economy and to protect our depositors’ funds. What we are saying as bankers is that people cannot continue to act with impunity. You don’t go from one bank to the other taking loans and you do not intend to pay. Genuine business people and catalytic agents of development, if they borrow money and their business is experiencing challenges, they should collaborate with their banks to find solutions. But, where people become chronic debtors, moving from one bank to the other, borrowing monies they do not intend to pay, we as bankers jointly say no. We would not take that anymore. We have put people on notice, if we see that you do not want to pay, we follow due process, give you the necessary warning, and if we see that you do not want to pay, we would name and shame you. We would publish the names of everybody including the directors. This is because you can’t be XYZ Limited and be hiding as good man. If you are a director of that company, you have a responsibility to make sure that that company is professionally managed.
Do you have plans to raise capital this year?
No, we are not raising capital this year. As a matter of fact, Fidelity Bank is much capitalised. Our capital adequacy ratio is in the region of 23 per cent, well above the regulatory requirement for our kind of bank. However, we are at an advanced stage of closing a debt bond we are raising. We are only waiting for the last regulatory approval. So, we would raise that and not capital necessarily. Can you give us some guidance? In terms of deposit, we are looking at 10 per cent growth, risk assets growth, we are looking at 10 per cent growth, inclusive of devaluation. By the way, I didn’t mention it earlier, when you record 26 per cent growth in loans, if you have foreign currency loans and the currency devalues, you also factor that in.
So, of the 26 per cent growth, currency devaluation accounted for about 70 per cent. So, NIM, we intend to grow to seven per cent, from six per cent, cost of risk, we intend to be at one per cent and ROE 10 per cent.