We target to break into the league of Tier 1 by 2022 – Fidelity Bank MD MWorld CEO, INTERVIEWS The Managing Director and Chief Executive Officer of Fidelity Bank, Mr. Nnamdi Okonkwo, in this interview, speaks on how the bank had been able to weather economic challenges, posting commendable results in 2018. He also speaks on the bank’s short-to-medium plans, with a strong eye on positioning it in Tier 1 by 2022. Despite the somewhat inclement economy, Fidelity Bank recorded about 28 per cent growth in deposit base in 2018. How was it able to achieve this? The deposits came from a combination of growth in savings and growth in current and domiciliary accounts. We have a new product where you can transfer Foreign Exchange (FOREX) with your mobile phone up to the regulatory limit. It means that we have also seen growth in our domiciliary accounts because people built up funds so that when they want to transfer they can easily use it. We also have corporates that are in foreign currencies earning businesses. The increase in oil prices also impacted on our deposit growth as it favoured our oil and gas upstream customers. In fact, in one year we grew deposits by about N200bn, which means that our market share is increasing. Two years ago, our desire was to make sure that low-cost deposit constituted a larger percentage of the total deposit. Today, we have largely achieved that as low-cost deposits now constitute about 82 per cent of total deposits. What are you doing to sustain loans and advances above 10 per cent? The environment is so challenging that growing loans double digit as we have done has prompted some people to ask us how we achieved it. In 2018, we took advantage of opportunities in some sectors to grow loans, a lot of which were to the real sector of the economy to encourage growth and create employment. For this year, we are guiding for between 7.5 and 9 per cent. What are your short-to-medium term growth plans? Two years ago, we set out at Fidelity Bank to drive a five-year strategic plan, beginning from last year; that would see us migrating to a Tier 1 bank in the country by 2022. We want to break into the league of Tier 1 banks and grow organically, keeping in mind that the other banks are also growing. We are driving the plan and the numbers show that we are making steady progress, year-on-year, in terms of balance sheet size, deposit and profitability. As we are doing this, we are keeping our eyes on the safety of the bank, viz-a-viz its capital adequacy, liquidity ratios, risk management framework, governance and compliance practices. For instance, as a result of our prudence in building up capital, we were able to cushion the impact of the implementation of IFRS 9, so we took the charge outright. What plans do you have to grow the bank organically and inorganically? A company’s strategic initiative for growth might be driven by either organic growth or inorganic growth. Our five-year plan was crafted to be based on organic growth, based on the projections we made. We also purposefully decided that we will not expand outside Nigeria until after 2022. So, our plans are based on organic growth. We also left a window that allows us to take advantage of emergent opportunities. When these happens, we will sit down and look at them and go back to our board to see if we need to alter anything to take advantage of such opportunities, or to continue with the organic growth path. On governance, the board has been strengthened. We brought on board some seasoned professionals. For instance, the chairman of the board is a former chief executive of a bank and a former Deputy Governor of the CBN: for 10 years. We also have with us the former MD of Guinness Nigeria and another former MD of a bank. As a deliberate strategy, each time a director retires, we replace him with yet another very experienced one. We also ensure diversity. We are also very serious about succession, therefore, we plan ahead. We recently appointed three executive directors at a go, subject to CBN’s approval. That is an outcome of planned succession. How would you say digitisation in modern banking is affecting Fidelity’s retail banking and branch network? We are driving our retail banking with digitisation. About 81.5 per cent of our transactions are now done through digital channels. That is why you will see us building just one or two new branches in a year. In the past, we used to do like 15 to 20 branches. I can’t remember the last time I went to commission a new branch or even wrote a cheque. Digitisation has made things more efficient. Still on digitisation, we have also taken into cognizance customers who may not have data to do their transactions, so we introduced our USSD *770#; which does not require you to have a smart phone or data to carry out some banking transactions. This category of customers do not need android phones to operate their accounts; they need just basic phones. This has made our cost-to-income ratio improve significantly. Ultimately, our cost-to-income ratio is likely to drop by about 50 per cent by 2022. Digitisation will play a key role in achieving this. Having said this, IT comes with a lot of risks. Any bank that does not pay attention to cyber risks is living dangerously. I doubt if any bank will even try that. Statistics have also shown us that even in some of the areas of the North with security challenges, we have very high adoption of electronic banking because people are sending and receiving money using their phones. What is a challenge actually leads to innovation and opportunity. You were a leading investment bank before the consolidation in the banking industry, but are you de-emphasising corporate banking for retail banking? We have just appointed a new Executive Director for Corporate Banking, and that should tell you how seriously we take corporate banking. Fidelity Bank used to be Fidelity Union Merchant Bank, and that was why most multinational companies in the country have continued to bank with us. Supporting business in this niche segment comes at huge costs. Therefore, building up low-cost deposits from the lower end of the market helps support lending to the corporate segment at rates lower than higher risk segments. We have grown our savings deposit account base from N75bn when I became the CEO on January 1, 2014, to N226bn at present. What is your take on payment service banks? It has been a prolonged push by the telecommunication companies to come into the banking space. We don’t have a problem with that. But they should be subjected to the same regulatory conditions that we have, because you are talking about depositors’ money. So, once all of us are subject to regulatory control, we will all do banking together. The sky is big enough for all of us, and as banks, we are not sleeping. That is why you see some of us deepening our digital platforms. What is your take on cyber security in the industry and what is your bank doing to tackle it? No bank can toy with cyber security measures because there is a contagion effect to it. If fraudsters can penetrate one bank, it means they can also affect other banks. At the Bankers Committee, we discussed this several times, and at the regulatory level, there are certain measures banks are compelled to take; like building a security operations centre and appointing people with certain qualifications and executive level personnel as heads of IT security. The Nigerian stock market is still experiencing heavy foreign capital outflows after the 2019 general elections. How do you explain this? We just got back from London on a road show and the outlook on Nigeria is quite positive. Indeed, based on some of the sentiments, we were being advised to raise Eurobonds because they want to increase their emerging market investments, especially the fixed income managers. On the flows, the European Central Bank (ECB) raised rates. With the increase in rates, capital will always follow where margins have just popped up. People generally move money to those areas, just the same way when we had our treasury bills going for about 20 per cent and everybody rushed in. That is the constant dynamics of inflows and outflows. What measures have you put in place to ensure that Fidelity Bank is not threatened as you grow to become a Tier 1 bank? We are keeping our eyes on our capital, risk management, governance and sustained profitability. This explains why, for instance, we had enough buffers to absorb the impact of the implementation of IFRS9. How is Fidelity Bank leveraging Fintech to grow its franchise? Under our five-year plan, which was crafted in 2017 and commenced on January 1, 2018, we got one of the big four consulting firms to do a full global analysis of Fintech and how we can collaborate with them. Part of our engagement strategy is partnership. This partnership has been on several fronts, including the deployment of a solution for a major customer of ours – an airline. We are bankers to an airline that controls about 40 per cent of the industry. Initially, they had challenges with ticketing on the electronic system they were using, and they came to us. Through collaborating with Fintech, we migrated their entire transactions to the cloud. This has worked so efficiently in the last one and half years without fail. Aside from partnering with Fintech, we decided that there was the need for us to develop our internal capacities as well. We decided to build a digital lab as part of the outcome of the strategic studies we had done with the consulting firm in the last six years. Today, we have several millennials that are IT-savvy, working at solving problems with innovative solutions under flexible hours and work environment, at our digital lab.