The CEO Interview
Our vision is to be Nigeria’s retail bank of choice – Unity Bank CEO
May 19, 2014 | 12:01 am| | | Start Conversation
Henry Semenitari, managing director and chief executive officer of Unity Bank plc
Though Henry Semenitari, managing director and chief executive officer of Unity Bank plc, took over the helms in January 2014, he has a glowing banking career that spanning over two decades and which covers operations, internal control, commercial, retail, consumer and corporate banking, under his belt.
In this interview with Phillip Isakpa, editor, BusinessDay, and Bashir Hassan Ibrahim, Semenitari shares his vision, landmark achievements and prospects for the future since taking over the helms at the bank. Excerpts:
Q: You have been in this position for sometime. Now, what are the broad vision that you have brought to this role that would help the perception of Unity Bank to be different from what it has been in recent past?
A: Strategically, our vision as an institution is to be the retail bank of choice in the next five years. Now, why retail bank of choice? Why not say number one, number two or three? It is not a game of who is first, but it is a game of who is preferred. It is a game of who has the right, solid proposition.
Now, what the derivatives of being the retail bank of choice in five years? Our strategies are strictly in three folds. First, the main derivative is leveraging on a very strong network across the country. We are looking at networks in excess of 240 branches coming from an amalgamation of nine institutions that are pretty very active in their own right and in their chosen business of strategy spread across Nigeria.
And also leveraging on the strong personalities that make up the board of directors as well as the quality of manpower that exists, they are what drives our proposition of aspiring to be the retail bank of choice in five years. We are targeting small and medium-sized business (SMEs); that takes you to local content, emerging middle market businesses.
Two is agriculture. We are the only bank in this country, I stand to be corrected, that is well-located and situated within the agrarian belt of the country. There is a semantic difference between location and how you are situated. You could be located around a place, but when you are situated, it means you are really into where the business is. We are not just located around the agrarian belt, we are also situated.
Three is rural economy. By rural economy, we mean leveraging our presence historically that was modelled around urban-rural drift. The essence of taking the economy to the last tiers of governance is to bridge the urban-rural economy. Post Bank in South Africa is the bank with the highest local dwelling settlements in the African continent. About 70 percent of its revenues come from rural economy.
Today, it is also competing with the cosmopolitan cities of Durban, Port Elizabeth, Johannesburg, with Rand Bank, Stanbic. In the rural economy, it is has no competitor. So for rural economy, we are a preferred choice as an institution, leveraging on our history. We have two local franchises. Those franchises are not just driving us in the cosmopolitan city, but located us in very strong local economies that today are flourishing if properly harnessed.
So what people see as a weak economy, we see it as a strength. You can imagine in places like Sabo Gidaora, Afoze, Oleh, Ozoro in Delta state; we have locations in those places. If we were not there, everybody would have to go to Warri, Benin, Asaba to do business driving for about two hours.
The derivative of the retail bank of choice target is strictly around SMEs, which takes you to the emerging middle market businesses and of course, the local content which is empowering the locals to take the destiny of the economy in their hands.
Today, Nigerian SMEs are the ones driving large businesses. So if you want to leverage on the local market, which is what grows the GDP, our people are driving first-class businesses offshore for foreign economies with requisite skills. The SME economy is key.
With the demography of 170 million people, you can’t go wrong in agriculture. Prior to the discovery of oil in Oloibiri, the groundnut pyramid, the tomato huts; we were feeding ourselves up to the point of exporting. So food security was guaranteed prior to the discovery of oil, which practically has become a curse instead of a blessing for the nation.
You talked about being the retail bank of choice and the need to get banks to different places like rural areas. But in specific terms, customers want to know what the strategy will offer.
This strategy will offer SMEs an opportunity to grow their businesses. We have the value proposition and the product offerings. When you are dealing with SMEs, it is an unstructured trade, family businesses that grow from generation to generation.
There are businesses that have no defined stream of cash flow, or an organised board of directors that meet quarterly or do AGMs, but they are running. Aliko Dangote today has become an organised corporate, but he started as a retailer. He started at the railway terminal. When you talk of rice, he was just a retailer, later got a kiosk, then he was just on distributive trade.
Today, he has taken over from the Achads, the Sambajus, the Eagle rice, the Clemco rice. It is a transition for those who remain steadfast and serious. So our proposition focuses on SMEs, start-ups and mature businesses, it is all about understanding the chain of the business. It doesn’t take away the fact that we also do corporate banking.
Two, on the agriculture side, we have a defined agric desk. We have just recruited somebody who comes with a strong skill set in the UN to man our agric desk. He is yet to resume, but we have a team dedicated strictly for agriculture, leveraging on the potential we are having presently.
We are the bank with the set of agric dealers in the country today and you know the intervention activities President Jonathan government has put into agriculture; both the dry season and wet season farming. All over the world intervention schemes exist as part of food security to support agric business, and within agric, there is a retail content and there is a wholesale content.
And of course there is the rural economy. But one major transition we have made as an institution to let this strategy work is that we have fundamentally shifted our business model from geography to industry lines. Our businesses are driven along industry lines, and clawed on strategic business units. What do I mean? Industry lines tell you we have created specific focus and skill sets for people to address.
Today, we have an executive director (ED) in charge of corporate and commercial banking. We have an ED in charge of institutional banking. We have an ED in charge of retail banking. We have an ED in charge of secretariat and services. We have someone in charge of operations and service delivery.
These are the five directorates. We have moved from what you fundamentally hear in most banks – ED, North bank, West bank, South bank. That is out. Why did we do that? It is to bring the business within the requisite industries that plays in the economy.
In this strategy shift that you have made, in terms of growing the profit of the bank, where are you hoping to pick the money, so to speak?
Yes, we are starting from our line of best feet. In planning, you come up with all your opportunities and you begin to take them sequentially. You can’t make money across board from day one.
So within the low end of the market, one where risk appetite is low, where loyalty is easily found because (I tell you) within the organised corporate, if I have to get the business of PZ today, I have to wait for a board meeting.
If PZ says every year, it is not more than four banks until they decide to take on another bank, so the lead time in the corporate business is long; that we provide for it in planning and keep chasing for it. But businesses within the shorter lead time, business where the assets conversion cycle from point of initiation to cash and profit, what you call in English the low-hanging fruits, are the areas you go for. And also strengthen the network.
The network itself is well-located, 246 branches. If you have an average of 200 closing daily net position of 500,000; when we say net, it is within your pay and receive, and your net is really 80 percent of your constituent of revenue. The remaining 20/15 and your month-end accruals, which is depreciation, amortisation and so on; if your net is achieved at 500,000, and today we are doing in some locations 1 million, some 5 million.
That is why if you look at our first quarter result, we closed with a cash profit of N3.2 billion, cash, core operating, no investment income, no recovery; those were accounted for separately. This is the first time we have had that post-consolidation – a cash profit of N3.2 billion in first quarter. And it is going to grow progressively in that manner.
This is without prejudice to the fact that we have not raised capital, which is what we are embarking on in the next one and half or two months per say. By the time we raise capital, trading equity will be bigger. What we have done is basically strengthening the network, getting the right intensity. In a retail network, two things guide you: there is what you call impact and frequency.
Impact is the critical mass. Getting the critical mass of clients is like owning a 15-storey building and you only have three tenants. You must build the impact to have full occupancy and ensure that everybody is paying as and when due, which is the frequency and the intensity. That is what we are driven by managing our net interest margin.
The moment your cost lines are watched in the retail sphere, it can also wreck you. A large network can be disadvantaged. If you are working at high cost end, our cost of fund today, I’m proud to tell you, is below half a digit, which means we have addressed our cost lines and efficiency is about how you manage your cost lines because size can be a disadvantage. With 240 branches in excess, everybody with some two generators, cars, etc. So what you need to do is to watch your cost line.
In specific terms, where do we see you taking Unity Bank in the next two to three years?
In the next three years, we believe that we will be first a dividend-paying institution. In three years, we should have begun to create a shareholder value both in terms of capital appreciation and dividend payment.
Two, in three years, we should have achieved at least 70 percent of our dream of being the retail bank of choice. It is a six-year horizon, we said 2020. But in three years, going with the quality of response from colleagues and the collective manner with which we are working, we should have achieve at least 60 percent of our strategy objectives.
How much capital are you looking to raise and how are you hoping to deploy this capital?
It is about N40bn. We want to deploy it for infrastructure, which includes technology, location, human capital. These for us are very critical in terms of the things we want to do, and of course trading capital. You need your own equity.
No matter how good or profitable you are as an institution, your balance sheet must show that you are capitally adequate. That means, in accounting, how much stake you have in your business. And capital adequacy is all about the level of equity you have put in waiting for its return at a set period of time. So it is pretty important.
What are your major challenges?
As you are addressing challenges, they also dramatically become strengths. One is capital adequacy. If it is not there, most of the things we have set out to do will be affected, which will soon become strength.
Two, is transition from a high public sector-driven bank to a private sector-driven institution. And why did I use the term ‘high public sector’? Coming with a franchise of old government presence, with massive government businesses that today have become unattractive, both for regulation and for our balance sheet, which is good. Let’s be honest.
For us sometimes, we need regulation to do the right thing. There is nobody telling you in Ghana about CRR and co, but you clearly know that it is not an attractive business. So that transition in itself is a challenge, but we are also addressing it, which is why we have gone around industries.
For us these are two challenges that will soon become strength. Come end of June, I’m sure you will celebrate with us when we will talk about how successful the offer is. The other will go with time, and we are beginning to see it. That’s why we could post a cash profit in excess of N3bn. The abrupt legislation on CRR was a huge shock for institutions that had huge government businesses. But we have to bite the bullet and work.
What leadership style do you bring that as one moves across from one branch of Unity Bank to the other, that will be a stamp of the style that you bring to bear on the business?
The style is very precise. First is to unlock the potential of the talents in this institution. For me, it is very critical. There are whole lots of talents, but their potential has not been unlocked.
My first goal as a leader here is to unlock the potential of the talents in this institution. That’s my own leadership style, and as we begin to unlock the potential, you will see the dream being achieved.
Two, is to see how much I can replicate myself within my first line of supervision. Replicating myself is to see how people buy into the strategic intent of the institution. But the most important thing is collectively for executive management to unlock the potential of the talents in this institution, which is the major driving force.
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