I think if you look at our results one of the big themes is that we have got no home market and we have many markets that are growing very fast. The top line revenue growth was very strong this year, our income was up 8 – 10 percent, but if you look at Africa within that we actually had 25 markets that were growing at double digit pace or over 10 percent, and 10 of those 25 were actually in Africa, so Africa is a region we are very excited about.
Africa is a market also that has done over $1 billion dollars in revenue for our wholesale business. Within Africa, Kenya grew at 34 percent, South Africa grew at 28 percent, Ghana grew at 20 percent and Nigeria grew at 13 percent, so we have various engines for growth. In fact if you look at our Africa business we have now got 8 markets that earn over $100 million in revenue, and three of those including Nigeria earn over $200 million in revenue, so it is an area that is growing very fast.
One of our advantages is that we have been here an awfully long time, and we are also a bridge between Africa and the trade routes in the Middle East, India and China. We are able to bridge those flows because not many banks are able to actually process those transactions.
When you say you have been here an awfully long time, have you been in Nigeria that long or are you talking about Africa generally?
We have been in Africa since 1853, we have been in Nigeria since the 1960s, but we pulled out due to the indigenization decree and we came back fully in 1999.
Your footprint in Nigeria is not very wide; the branch networks are not very visible. Is that a strategy, are you going lean and leveraging on technology to drive growth in the country? Or do you have plans to go full scale with branch build and compete with the established Nigerian Banks?
At the moment our wholesale business is in 5 cities in Nigeria, and our retail business is in 11 cities, so we very much have an organic strategy here. Ten years ago we made $21 million in revenues here, but we are now well over $250 million in revenues, so we have increased more than twelvefold just by growing organically.
If we look at the infrastructure, today we have 36 branches and we are looking to put another 100 branches into the African business during the course of the next 2 to 3 years of which a vast majority of those will be in Nigeria, Ghana and Kenya.
Is this all going to be organic growth or do you plan an acquisition to drive that growth? AMCON has 3 banks up for sale, are you interested in any of them?
That is a very interesting question. Traditionally the bank has grown very strongly, as a group we have grown income over the last 10 years at an about 15 percent per annum clip on average and we have done that by and large by organic growth, we have made some acquisitions in certain countries, to gain capability by buying expertise in that particular geography, but by and large it has been achieved by organic growth. Never say never, but by and large it is an organic strategy.
If you break down your earnings in Nigeria, you have the retail side and wholesale side, where do you see more growth coming from? And on the retail side are you doing a lot of consumer loans, credit cards and stuff like that? How do you plan to grow this side of the business, because access to credit and credit extension is a problem in Nigeria?
We are growing the assets side of the book. Essentially the strategy for the bank is to grow liability base and asset together. We like to be deposit funded and fund our own growth essentially.
Both businesses (wholesale and retail) are growing at a double digit pace in 2012 for Africa. For Nigeria right now 80 percent of revenue comes from wholesale banking while 20 percent comes from retail. The retail business is growing very fast, we have about 900 staff in Nigeria, and over 500 of them are on the retail side, that gives you an idea of our commitment to grow that segment of our business.
How are you driving that retail business, what kind of technology, credit checks and so on are you employing? It is a very difficult thing to do and a lot of banks have not been able to make a success of it in Nigeria, and how do you think you can have an edge over the established competition?
We are expanding very fast, we started with three branches, and we now have 36 that will give you an idea of how fast we have grown. We are also looking to bring the top talents in the industry into our Bank to help drive that process.
Your brand slogan is ‘here for good’, can you explain what it means and how it relates to the Nigerian business and environment?
It is a play on words really. ‘Here for good’, so it means here for the people, here for progress and here for the long run. We are here for good is also in the fact that long run, we have been in Africa, we have a lot of history and experience in the continent.
We intend to be here for a lot longer, you know we are not a flighty bank that is here today gone tomorrow, we are putting down a lot of infrastructure here and a lot of branches, we have opened 27 branches across Africa last year and a good lot of those were here in Nigeria, so we are here for the long run.
Here for people and here for progress is the other two parts of the slogan, so ‘here for progress’ is all about, banks in general have more ties with the people, it is not just about earning money or making profit, but about being a responsible partner with the community and responsible citizens. So being able to showcase that is what the slogan means.
We do that in a variety of ways. ‘Seeing is believing’ is a global programme we do with the communities. We have raised $56 million globally and Nigeria is getting $3 million of that. It is all about being a good corporate citizen.
Being here for good is also about being here to lend to SMEs, helping people buy their first homes, paying for their kids education, just by being a good profitable bank and doing the right thing day in day out.
The third aspect of this is ‘here for people’, and that means being here for our staff, here for our customers, and here for our clients.
What is your ideal client, or what kind of customer are you trying to attract. Is it the BOP (bottom of pyramid), type or the middle class or are you going for the whole market?
There is a degree of segmentation in what we are looking to do, so on the wholesale side in Nigeria it is certainly the multinationals, the large local corporate’s, we also have something like 7,500 SME customers. The standard definition for that is anything under $25 million in turnover, and that is something we are looking to grow, and on the retail/consumer side it is slightly high end, for now as a strategy.
We will increase our customer base as we grow our branch network to be able to maintain the same quality of service and standard.
We also have a lot of financial institutions in Nigeria as our clients which gives them the opportunity to serve the BOP type people. So we may not do a lot of the direct lending, but we did about $1.4 billion in lending to local banks last year which invariably gets passed on to SMEs.
We are able to link the bourgeoning trade flows between Nigeria and the rest of the world. There are not many banks with which you can trade at one end in Nigeria and in the North Eastern province of China for example at the other end.
You have moved your African headquarters to Johannesburg from Dubai, any plans to further segment that African pie, into a West African and East African hub?
On the hub point absolutely, we already do that. We use Johannesburg as our regional headquarters, but we also look across the different countries we are in and see what makes sense at the regional level and at the international level or in the global area. So Lagos or Accra would be our hub for West Africa and Nairobi in East Africa.
A lot of it depends on where the people are and what services are needed. The challenge is to get regulators to understand that if you want the best that comes from having an international institution in your country, it is important to allow a degree of freedom.
How is the regulatory environment for your bank with BASLE III first globally, and of course locally, is it an impediment or helpful to your growth plans?
In terms of the global economic and regulatory environment, there is a lot that the regulators are doing in terms of BASLE III; strengthening the capital base of banks, improving the liquidity, establishing resolution plans for banks should they get into trouble and so on.
Those are all very good initiatives. I think what we would look to seek is that there is a degree of co ordination globally. There is a lot of activity going on and initiatives coming down the pipeline in many jurisdictions which may be in conflict with legislation in other territories. The unintended consequence of all of this massive regulation is something we are talking about a lot.
In terms of the Nigerian situation, we are working very closely with the Central Bank (CBN) – you can say that we are partners in progress- on the implication of BASLE III for Nigerian Banks.
Nigeria is fortunate to have a CBN governor that signaled the changes he wanted to make to the market, and we have been able to adjust to those changes in regulation.
The bank overall is extremely well capitalized, the liquidity position is very strong our liquidity ratio is well over 100 percent, our asset to deposit ratio has improved to 74 percent, which means for every 100 dollars of deposit, we do 74 dollars of lending, we are a very liquid organization at a group level and at each particular geography.
We did two rights issue, one in 2008 and the other in 2010, which further strengthened the capital ratio, and our credit rating has risen in the past four years through the financial crises.
Are there any signature deals done by the bank in Nigeria that you want to talk about?
There are quite a few, there is the NNPC deal, which the House of Representatives raised issues about. There are many others which we have done quietly in the oil and gas sector, and other areas. We have a long standing relationship with NNPC by the way.
We have also announced a transaction with the IFC on the Naija bonds.
We have also worked with the CBN and Finance Ministry on an advisory level, on getting a credit rating for the country and better macroeconomic management.
Tell us about your sponsorship of English Premier League football club Liverpool, and how you might want to leverage on that in Nigeria, we have a lot of premier league fans?
Well it is a four year deal, and we are just two and a half seasons into it. It has been very successful for us. This was all about raising our brand profile, globally and in a lot of our markets. We can drive a lot of revenues by the sponsorship, by doing product promotion.
What we do locally is raising brand awareness, and a big part of that is happening in Nigeria, but it is also being a part of the local communities by using football clinics, prize giving, and that has great resonance with the clients and customers.
You are growing very fast, where do you plan to be 5 years from now in Africa and in Nigeria, and what are the cost implications of that growth?
The two big public commitments that we have made, is that in the next 4 – 5 years, we plan to double revenue. As you know Africa is a sizable portion of our revenues today at $1.6 billion.
Our second aspiration will be to increase our footprint in terms of branch infrastructure. We had 160 branches in Africa at the end of 2011 and we added 27 new branches last year and we look to have north of 250 branches by 2015.
We have about 7,000 staff in Africa now and of that 800 are in Nigeria, we look to increase that and also to introduce new products such as mobile banking which we will launch in a few weeks.
Typically for the group as a whole we tend to pace the cost growth so that it is in line with the revenue growth. Our cost growth this year was actually less than our revenue growth.
Stephen Atkinson the group head, corporate affairs at Standard Chartered Bank was in Nigeria last week, on his first trip to the fast growing West African country and Africa’s second largest economy. He spoke to business day analyst PATRICK ATUANYA about the banks growth plans for Nigeria.
Stephen Atkinson
