Nigerian Bank Nigeria Afribank Plc – Rescue Operations Of Turnaround Managers – The Journey So Far

Source Businessday: John Omachonu, Blessing Anaro & Abdul Imoyo, 1 April 2010

The turnaround managers for the rescued banks being supervised by the Central Bank may not be having it easy with their assignments, but so far some level of successes have been achieved with greater prospects in the days and months ahead.

Trouble may not be completely over for the embattled banks under the management of the Central Bank of Nigeria (CBN) in the past seven months for some and five months for others. A cursory assessment of the impact of the Turnaround Managers however, suggests that most of them may have performed creditably well considering the circumstances and basis for their appointment.

Management experts and stakeholders are unanimous in their submissions that taking an objective assessment based on the alleged malpractices of their predecessors, some of the measures taken like staff rationalization, blocking of leakages and cutting down wastes, among others, are expected no matter how painful such actions might be in terms of bourgeoning the labour market.

This is not to say however, that there are no pockets of alleged wastage and extravagant spending by some of the managers. However, when Business Day got across to image makers and, in some cases, chief executives of these banks on the need to render account of their stewardship, unfortunately, only Union Bank, Finbank and Oceanic Afribank responded by upholding the tenets of open disclosures and transparency in operations which are the hallmarks of the CBN’s current reform agenda.

However, the general consensus is that there is need for periodic assessment of the managers. According to an analyst, “if the CBN chooses to ignore allegations of unsuitability and growing excesses on the part of some of the turnaround managers imposed on the rescued banks, it would be expected that more than six months after their appointment, being the ideal probationary period, their performance should have been evaluated and made known to the public, rather than pretend that all is well.”

The job of the turnaround managers is certainly not what some think it is. But going by what they have done so far, it is a tricky one, though many of them, according to the little information provided, seem to be succeeding so far. For those that have distinguished themselves in this assignment, there are key areas where they have made impact. For instance, some of them have done very well in the area of recovering debts owed as a result of non-performing loans, payment of monies owed the CBN through the Expanded Discount Window (EDW), management of staff, level of participation in the Wholesale Dutch Auction System (WDAS), plugging of financial leakages among others.

According to information made available to Business Day, Finbank, under the leadership of Suzanne Iroche, managing director and chief executive officer of the bank, the management has been able to enthrone best practices in corporate governance in the bank and its subsidiaries. This was demonstrated, through the publication of the bank’s October 31, 2008 Audited Accounts and September 30, 2009 Management Account in two national newspapers. Other measures introduced include automation of routine processes to increase efficiency, institution of proper maintenance practices as well as elimination of wastage resulting in the drop by 20 percent.

To ensure that the bank develops a strong sustainable business model and grow its business and revenues, the new management has focused its attention on improving its liquidity through growth and diversification of its deposit base. The direction was to radically change the bank’s deposit mix from dependency on high volume rate-sensitive purchased funds to a more stable, low cost demand deposit base. The success of this strategy is evident in the growth rate of 25 percent on its total deposit volumes from about N153.7 billion in September 2009 to N192.31 billion as at January 2010.

In Afribank, the turnaround management team led by Nebolisa Arah, managing director and chief executive, has since introduced a two-year plan. After a comprehensive review of the business operations of the bank, the management set out the route to stability, capacity utilization, maximization of potentials, sustainable growth plan and the implementation of a robust Business Continuity Plan.

According to available information, the bank has also exited the Expanded Discount Window having paid debts owed the apex bank and now within the regulatory requirements of 25 percent liquidity ratio. Other fundamental ratios are also on the increase. For instance, available data shows the bank has positive clearing position from the previous substantial deficit to N3.2 billion surplus by November 30.

Union bank under the leadership of Funke Osibudu is believed to have recovered over N41.028 billion of the non-performing loans and still optimistic of substantial recovery. The bank’s liquidity ratio position presently hovers between 27 percent and 42 percent compared to CBN’s 25 percent. The bank is said to have made internal progress in the implementation of its enterprise transformation programme code-named Project GEAR. Most of the cumbersome business processes have been removed. The infrastructure in a good number of its branches has been upgraded to complement the new processes.

In the same vein, the bank’s profit before provisioning during this period was up by over 100 percent from N11.2 billion to N27.3 billion for the same period. However, the net loss before taxation of N212 billion was due to the provisioning.

Oceanic Bank’s team under John Aboh’s renewed focus is on liability generation anchored on the retail banking platform. The focus here is on mobilizing low-cost deposits through the bank’s extensive network of branches and suite of retail products.

This is complemented with world-class transaction banking and has brought about a steady growth in the bank’s deposit base after the initial panic withdrawal occasioned by the CBN intervention. Business Day gathered that “following the CBN’s action, the bank’s deposit base declined by about 18 percent from N528 billion to N430 billion in early October 2009. However, by the end of November, this had grown by 23 percent to N528 billion and thereafter to N560 billion by the end of December. January 2010 saw a further surge in the deposit base to N600 billion, a growth rate of 40 percent from early October 2009 level”.

Of all the eight banks under the CBN management, Equitorial Trust Bank (etb) is believed to be more stable partly because it is not quoted on the Nigerian Stock Exchange. In fact, CBN had reinstated one of the directors sacked in the wake of the take over and Sanusi Lamido Sanusi had acknowledged that the bank had paid back the N30 billion it borrowed and has promised to take some corrective measures in terms of injecting more funds and opening up of ownership structure.

Intercontinental Bank is said to be doing well except for some oppositions both internal and external being faced by the management led by Lai Mahmoud Alabi. The management, in its desire for huge recoveries, embarked on waivers which were widely condemned by the public. Alabi had said last year that the team would not be distracted; that their preoccupation was to bring back the bank to its former pride of place. If things had worked out well, Bank PHB and Spring Bank would have merged into one following acquisition of the former by the later. However, the case is in court.

Nigerian Bank Nigeria Afribank Plc, Centra Bank Of Nigeria, Finbank Plc, Oceanic Bank Plc, Union Bank, Equitorial Trust Bank, Bank PHB