Sekibo: We Have No Regret Acquiring Enterprise Bank
Mr. Ifie Sekibo is the Managing Director/Chief Executive Officer of Heritage Bank Plc. In this interview with Joseph Ushigale, Chika Amanze-Nwachuku and Obinna Chima, the bank CEO responded to all the allegations levelled against the financial institution
We have had this continuous negative news about your bank, that it is illiquid and that you can no longer meet your obligations to customers. What is the true situation of things at Heritage Bank?
The true situation is that it is not true that we are illiquid, we have always been liquid. It is true that the whole industry faced some form of liquidity challenge when we all moved monies into the Treasury Single Account (TSA). So, a customer makes a request overnight for N2 billion or N3 billion, and you tell him to allow you pay him over two days, and they shout, thinking it is illiquidity. It is not! It has to do with the management of your liquidity position. But we dare to say that since June that this negative press started and till today, our doors have not closed one day. Every customer that comes in gets his money. Yes, there could be delays, but those are normal banking activities where you are managing your liquidity naturally, so that you gauge your inflows and outflows and know how to manage them. And if anybody would look at it, we have over this period, because of the negative press, not that the negative press are true, and people’s anxiety, we had flight to safety. That is some customers took their money away from the bank, and when they found out that nothing happened to the bank, they brought back their money. In that outflow period, over N300 billion left our system and came back into our system. It left and majority of that fund have come back in, because people have realised that it is all false rumours. Firstly, they said the next bank the Central Bank of Nigeria (CBN) would take over was going to be Heritage Bank. It is not true! The central bank cleared that issue. Again, some people believe that if you don’t sell foreign exchange (FX) to them, then you are illiquid, it doesn’t add up that way. FX is a general problem within the industry. If we can’t get it from the central bank and it is not available, we can’t sell what we don’t have. So, for somebody to say if you don’t sell FX, that means you are illiquid, it doesn’t add up that way. Are my customers who have domiciliary accounts with me satisfied? Yes they are. Am I able to fund Letters of Credit (LCs) that are legitimate? Yes, I am. Am I able to open new LCs? Yes I am. Am I able to give credit to customers that need them? Yes I can. So, if I am doing all these natural banking and traditional banking, where then is the illiquidity that anybody is talking about? Naturally, when people hear that there is a problem, they rush to the doors of the bank and even the slightest service failures could make people believe it is true. But when you correct the service failure and naturally everything is going on well, then you ask, where is this story coming from? We are a public institution and so members of the public react to the kind of news they get and the kind of news they are fed with. We are saying that there is no such thing as illiquidity and we are not insolvent. We are very liquid, we are meeting our obligations and we would continue to meet our obligations.
You touched on the FX issue. One of the allegations was that the FX in the domiciliary accounts of your customers had been eroded by the bank?
Let me put that in context. And this has to do with the entire industry. When we first had challenges with FX, we resolved either to bring down our past due obligations of our customers, to use some of our domicilary account position to be able to fund. It was a national issue. If you don’t pay down your past due obligations outside with your correspondent bank, they cut off your credit lines and everything you have. Your customers would be unable to open new LCs. So, you took the difficult decision to say let’s fund from our position, those LCs, believing that either the CBN, or you could have funds from export proceeds to be able to meet those obligations. Now, because the supply from those two ends is limited, there is a funding gap. That funding gap could cause delays here and there. Don’t forget that we have risk assets which are loans we have given to customers in dollars. They also pay in piecemeal. So, sometimes, a customer comes to say he wants to take $1 million and you promise to give him his $1 million in two days, because you have a shortfall. Another customer owing you pays back, and you then meet up that obligation. So, naturally, it revolves. No bank today can say every customer that comes into their banking hall, they can pay them all. It is not possible. And when you have a challenging situation like we have today, the chances are that there would be gaps here and there, but in the long run, you meet your obligation and pay them, which is most important to the customers. There is no where that it is written that if John gives me $1, I should keep the $1 and wait for him and whenever he comes, I should give it back to him. When John’s $1 comes, I can use it to pay Peter. When James’ $3 comes and John request from his $1, I would take from the $3 to give him and then keep $2. That is cash management and in that process there could be gaps, which is why we have the interbank. If I have a gap, I can call on Bank B, to say I have a gap and I need fund, and I would pay interest to Bank B for that gap to be filled. The day Bank B also has a gap, it would call on Heritage Bank for support to cover its gap also. And that gap coverage might be one day or two days. It doesn’t make the bank insolvent or illiquid at all. The system is self funding and self correcting over time. So, you don’t just target one bank, when in truth every bank will do the same thing.
Another of the allegation was that your bank is now relying heavily on the interbank market and borrowing at very high interest rates?
There is what is called the interbank. In today’s market, if I have to take money from bank B, I would give them treasury bills in replacement. It is a treasury play. If I say Bank A, give me N1 billion, I must give Bank A N1 billion worth of treasury bills. That is in lieu of cash. When I get my cash, I return back the N1 billon and collect back my treasury bills and keep. When they don’t have, they would give me same treasury bills and give them cash. That is what the interbank market is all about. Now, some banks have relationship with other banks that don’t require them to give treasury bills, just the money. We call that clean lines. As a new bank, I don’t have
Heritage Bank used to be Societe Generale Bank of Nigeria (SGBN). That bank was dead for 10 years. This same group of young men, turned a 10-year old dead bank to life and made it work. Now, before we could swallow that, we went and bought Enterprise Bank. So, suddenly you are seeing some people who were not able to revive one organisation that was dead, customers monies were lost and we were able to make customers get back their monies 10 years after. We now went into Enterprise Bank with the belief that we can do the same thing and leverage on the branch network. And we succeeded. There was no rancor. Most times if you have merger of that nature you have rancour, but here there was none
a clean line with any bank. So, every bank that gives me N1, I give them corresponding treasury bills, which means I must be strong. So, while you call it borrowing, for us, it is a treasury play. Again, I might have a customer that wants to do a transaction. For instance, he wants to bring in goods and request that Heritage Bank should borrow him N2 billion. And I say okay, rather than use my cash which I use in trading everyday, I can go to Bank A, give the bank treasury bills, I collect the cash and give to customers. The bank gives me at probably interbank rate, I top it up and give to the customer. The customer finishes, refunds me my money and I redeem my treasury bills. So, how I manage my treasury is a function of what I see, what I read in the economy and how I view the economy. I might have tonnes of cash and I may decide to buy treasury bills and hold and take cash from interbank. Sometimes, treasury bills rates are better than interbank rates. So, I will put the money in treasury bills and collect cash from the interbank. What I now do is to go to the central bank, buy treasury bills at a higher rate, I take the treasury bills, I go to Bank A and say take treasury bills and give me cash, at a lower rate. I use that cash to trade. The net difference is profit to me. That is what is called trading in treasury and interbank market. And it is a continuous thing for every bank. And if while doing that, I have a shortage of cash, I then quickly unwind. So, doing natural banking shouldn’t be a problem. I have a balance that was published and everybody saw it. We have only been one year as a national bank after taking Enterprise Bank, which was a loss-making bank, and we were over N1 billion profitable. That bank is not insolvent. Our balance is there for anybody to review. We have over N65 billion of shareholders’ funds. So, you are not talking of a bank that is small, even though we are new.
The other issue is that because of what is going on in your bank, FirstBank that is handling your international clearing is said to be very reluctant to deal with Heritage Bank and that your bank is indebted to them to the tune of about N5 billion?
Let me correct that impression. For every clearing you do, first you put what we call a collateral with the clearing bank. That is a basic minimum, that in the event my clearing cheques comes in and my inward clearing is less than my outward cheques, I must have enough to security to cover the difference. On one or two days, which happens anywhere, there was a difference and FirstBank said we should make up the difference, and we made up the difference. Now, when a bank comes under the type of bad press we faced, there is always the tendency of mass cash out. In that period of mass cash out, you then need to find a way to quickly unwind your securities to back it, which was what happened. That I was out of FirstBank’s difference by N3 or N4 billion is not new and not illiquidity. FirstBank would only say Heritage Bank should make it up by N5 billion. Then the question would be, how much is our clearing collateral with them? Probably, if clearing collateral is about N4 billion, then we need to send them extra collateral of N1 billion treasury bills. Once we give them, you are covered and you go to clearing the next day. Now, when you have the kind of bad press, it is possible that in three or four days, you may have more outflows than inflows. You have to be strong enough to withstand such shock. FirstBank being your clearing bank would want to know if you are able to stand it and our answer to them was “yes, we can.” And that “yes, we can” is a function of us moving treasury bills. So, we have to do that daily, we don’t do that monthly. I would not want to give FirstBank, N1 more than what I am required to give them, which I will never know until the end of the day. It is only around 6pm of that day, that FirstBank would send me an e-mail, stating our net clearing position and they would inform us of the amount expected from us. And the first thing in the morning, Heritage Bank would move the money to FirstBank. The next day again, you do clearing and they (FirstBank) might say “Heritage in your net difference, you have credit,” and they will ask you (Heritage Bank) if they should return the money or they should hold it since it is a revolving process. If you say hold it, they would and if you ask them to return it, they would return it. So, whether you have a negative or positive position is a function of how much comes in and how much goes out. Have we been out of clearing? Not one day, not one minute and not one second. Is FirstBank anxious? Yes, FirstBank would be anxious. When there is a bad press, they know because bad press gives rise to possible more outflows than inflows. There would be inflows quite alright, but there might be more outflows. So, they (FirstBank would be talking to you (Heritage Bank). So, anybody who sees that talking to as a problem, then doesn’t understand banking. Let’s say there is a worst case scenario that I don’t have bills to cover my position that is where the central bank comes in because it is the lender of last resort. If FirstBank says today, Heritage Bank what you have is N2 billion or N3 billion as negative, what we have as your clearing collateral is N1 billion, do you have N2 billion to give us? And we say no, I would tell FirstBank to hold on one more day and we would talk to the central, bank, so that we can borrow from the CBN and give you (FirstBank). So the CBN would give us the money at the Monetary Policy Rate (MPR) plus five. While the CBN sets the MPR is that any bank that has that would come and take from her and use. So, if then I say because of the rush out of the door, I need N5 billion, to cover for the gap, the CBN would give me. But I must always tell the CBN when I am going to repay. In fact, they don’t need to ask me, the day they see credit in my position, they take it. It is a self-running and self-balancing treasury system. But we must be talking to each other just to be sure that we know what is happening. So, when people said we are out of the clearing or that we are owing FirstBank, it is just a revolving situation. That was why the central bank can boldly come out to say every bank is okay.
Again, one of the allegations was that you have been frequent at the CBN discount window, which to some is also a sign of trouble?
If you have a kind of negative press which makes money go out of your system more than it enters, you will access the window so that you don’t cause systemic risk.
One of the things that exposed the situation at Skye Bank then was the frequency at which it was accessing the discount window...(cuts in)
No. Let’s separate the two, and this is very important. The reason the CBN intervened in Skye Bank was very clear and the CBN also mentioned it. We are not in that situation and we cannot be part of that situation. Those things the central bank stated as reason why it intervened in Skye Bank do not apply to me. What we have here are normal interbank and banking activities. We are profitable; we are in the money market playing normally. We are placing and we are receiving funds. That one day my placing figures went higher than others, does not mean a problem. When there is a black swine effect where a negative press comes in and you have a more than normal outflow suddenly, the central bank and everybody would want to know what is happening. Somebody who gave you money for 90 days, from which you have planned and given loans, you bought treasury bills with the money, and the person comes before the 90 days that you give him back his money. That will surely reverse everything you planned for. You have to quickly adjust your cash position to be able to address the situation.
There are also allegations that you and your directors are involved in insider trading and you laundered over N12.8 billion. Also, that the EFCC has invited you for questioning over money laundering. What is your position on these issues?
I think the EFCC is still alive and is still there. Those kind of allegations are easy to find out. I have never been at the EFCC to discuss any such thing. They have never called me and we have never had any discussion on it. There is no day anybody has come to my office to have that type of conversation. The only time almost all bank CEOs went to meet the central bank was because of the NNPC money. They mentioned our name in the press. And Heritage Bank had the least of the amount owed - $85 million, which we inherited from Enterprise Bank. We took over Enterprise Bank, in 2012, NNPC gave Enterprise Bank $85 million. Today, it is not there, so we are dealing with it. And we have gone into an arrangement with the central bank and NNPC to tell them how we would pay back. I was not in that organisation when the $85 million was given. So, when somebody makes that type of allegation, I just wonder how you launder money that is in the bank’s position. As at 2012, I was not even a managing director of a bank and how can I launder money that I was not part of? So, I am saying it is not true.
So, what do you think is the cause of the continuous bad press?
You see, when we were Heritage Bank, we were at peace. We were small and we threatened nobody, we did our thing and we grew our business. We bought Enterprise Bank. Apparently...(laughs).
So are you saying it was the acquisition of Enterprise that triggered the bad press?
I want to be very philosophical about that. Why? As a business decision for Heritage Bank then, we believed it was one of the best decisions we took. Enterprise was an organisation that had about 160 branches; Heritage Bank had just 11 branches. To get one branch functionally running, could cost you on the minimum, N60 million. It’s a no brainier to say if you get those 160 branches, you can do more business, distribute your services across the country, than with 11 branches. Secondly, the financials with which we used in taken over Enterprise Bank was 2013/2014. It took us a year and six months to consummate that transaction. So, by the time we finally consummated the transactions, the financials we used were far different with what we came out with. We are not making excuses; we did not go out to shout that that was wrong. We took it in and
I have said anybody can go to the Corporate Affairs Commission (CAC), you can come to our office to ask for the register of shareholders. We have an annual general meeting in which the register was made public. See, whether there is a pseudo or anything whatsoever, you can trace. You can take each of the shareholders and trace them. Saraki is also alive, you can ask him if he has at any point in time added to his shares at Heritage Bank. But would I deny that they were the owners of the bank before we bought it? It is true! I was a secondary school boy if not less, when SGBN was running. I wasn’t part of it, I am just an investor. Many investors had tried to buy SGBN over the years, but we succeeded. If anything, I think we deserve commendation. Rather than crucify us, we should be given national awards for bringing a dead bank back to life