Bond Bank: A Bride Going Alone|
By Samuel Famakinwa
When the history of the Nigerian banking industry would be told, a name that would distinctively feature as a bank which used the most uncommon people and held them to the most uncommon standards would be Bond Bank.
A new generation bank which is barely two years old and may not have declared huge profits like some of its competitors had done in the past, but started business inculcating in its people the idea that "a fresh licence meant a fresh approach", thus placing a great deal of emphasis on ethical practices and excellence, among other values required to create a great brand.
Bond Bank was born at a time when the market was thought to be saturated and competition at a very high point, a situation which created a daunting task of breaking into the market and creating an "uncommon" niche. This led the promoters back to the drawing board on most issues, prepared to carve unique path through the Nigerian terrain in a bid to create an exceptional brand. Most analyses in recent times have concluded that the Bank has lived up to the challenge by setting an enviable record in its first year of operations.
The bank has invested in establishing "critical pillars of strong and vibrant people, impressive service and uncommon standards from which a distinct brand has emerged", says John Darlington, Managing Director/Chief Executive, allowing the bank to leapfrog in such a short time ahead of over two thirds of the banks in the industry on almost all indicators.
Having built a strong brand name in a relatively short time, recorded solid financial indicators and concentrated its resources on areas which are critical to sustained performance, Bond Bank may be said to have all the ingredients of a major success story and one of the big test would be how it manages to survive the on-going consolidation exercise in the Nigerian banking industry where the Central Bank of Nigeria (CBN) is insisting all banks that want to operate in the country must have a minimum capital base of N25 billion.
Since the CBN declaration, many bank owners and promoters have been bragging that they would meet the challenge.
While it may be easy to believe that some would definitely reach the "Promised Land" because they have the track record or because they have built an enviable institution in the course of their operations so far, for many others, however, it may require another miracle of turning "water into wine" which may already have been over 2000 years late.
Would Bond Bank be able to meet this demand considering its present financial status? While only time would tell, it may, however, be necessary to have a closer look at what it has been able to achieve in its short years of existence.
Prior to the recent CBN directive, Bond Bank was the only bank in Nigeria licensed with N2 billion as paid up capital. At the end of its first financial year, the bank had a Basle ratio of 17.2 per cent which is substantially higher than the regulators minimum requirement of 10 per cent in the industry. Incorporated on August 20, 2002, the bank received its banking license on October 31, 2002 and commenced operations the very next day, November 1, 2002 and this was a record.
Its asset quality is sound compared to most of its competitors. The Bank had no non-performing loans as at year end, though it is expected that the loan book will take a few years to mature, analysts are arguing that the bank is off to a good start in this regard as there are no concentrations in the balance sheet and in the loan book in particular.
The bank carefully put together a management team with a proven track record of integrity and ability. By all accounts, these seasoned bankers have all it takes to successfully run a professional and stable bank.
Its profit before tax of approximately N530 million is a first for a Nigerian bank publishing its first financial statements in a highly competitive environment. Although the cost to income ratio is high at about 71 per cent, it may be a reflection of the bank's deliberate decision not to cut corners and to start branch expansion early. The bank's net earnings per employee of almost N12 million also puts it amongst the top 10 in the industry.
Bond Bank's balance sheet looks liquid and fully compliant with CBN requirements regarding the minimum liquidity ratio, which was approximately 70 per cent compared to the regulatory requirement of 40 per cent. Also, the bank has started to build a core of stable current account balances which accounted for 70 per cent of deposits as at the balance sheet date. This high proportion of current account balances in the deposit mix may also be unprecedented for a one year old bank in Nigeria.
Recently, the bank announced its plan for recapitalisation which involves a private placement to raise the full N25 billion. In other words, it wants to go the whole stretch alone. It intends to be floated on the Nigerian Stock Exchange in mid 2006.
Why going it alone? Darlington says "Bond Bank is here to stay, and is rising to the challenge. It raised N2 billion recently to start the bank, it will raise N25 billion to strengthen the dream. Bond Bank is a winner and will come out standing strong by December 2005.
"Bond Bank is a viable investment vehicle. Investing in Bond Bank is a step in the right direction and would translate into great investment returns. In fact, many stakeholders made financial commitments towards buying shares before the placement commenced.
"The brand values and standards remain even during this period. Bond Bank's strengths as an organization have been emphasized by its philosophical underpinnings. These include its values, its vision to Create an Exceptional Brand; its mission to Serve with Integrity; and its brand driver, the Bank of Uncommon values. In the time it has been in existence, Bond Bank has been associated with excellence, of assets, people and performance".
Bond Bank changed the hours of business from the conventional, providing a new level of convenience and flexibility for clients as it opens at 7.45am and closes at 6pm. Other banks in Nigeria close at least two hours before Bond Bank. In terms of corporate branding, it took it to another level and the elegance of its banking halls resulted in its Head Office winning the 2004 St Moritz Style Award for Building Design. It also created the role of Floor Manager to ensure exceptional service at all times.
The passion to serve customers by its staff is maintained in such a way that the vision of the brand is always in view and it is constantly renewed by the culture of learning and development inherent in the system.
Darlington also disclosed "it started when the bank was set up, with every pioneer employee going back to the classroom for a period of 6 to 12 weeks thereby pooling the experience and skills of the best young minds within and outside the industry. This produced a team which felt more like family than colleagues, and allowed for a melting point of ideas out of which came a strong mission of passion, integrity and service. This attitude of learning is also evidenced in the Bank holding a Knowledge Development session once a month which sees external parties sharing insights with staff and also, Bond Bank staff teaching each other new things and sharing experiences."
He also added that a clue to the bank's trump card lies in the words of Sir John Bond, chairman of HSBC Holdings Plc, who said, "There are few original strategies in banking.
There's only execution." Bond Bank, he said, discovered the power of distinctive execution.
"The Bank stands at the threshold of joining the big players within the Nigerian banking industry. We see tremendous opportunities and challenges in the Nigerian financial landscape resulting from the Central Bank of Nigeria's N25 billion minimum capital directive. Apart from the incentives which CBN has offered, the new requirement will eliminate weak players and make the few surviving institutions more globally competitive. The benefits of being a big bank in Nigeria after consolidation are certainly enormous and the Bank may consider the various strategic options available to it.
"We believe that as the banking landscape looks set to even out considerably, a player that places a premium on service and truly partnering with the client will attract the discerning segment of the market. We take pride in our ability to develop innovations in our services and products, which have been tailored to suit professionals, entrepreneurs and corporate bodies, and make life easier and more convenient for them.
"This is exemplified by the launch earlier this year of Bondscape (our electronic banking service), All-in-One Account and Automatic Overdraft for Professionals.
Preparations have reached an advanced stage to introduce a wide variety of electronic payment solutions including debit cards, automated teller machines and point of sale terminals. We intend to unveil numerous other value-added products and services in the short to medium term, while our information technology platform will be honed to enhance our current service efficiencies and assist the process of product development.
"As business in Nigeria becomes more varied and sophisticated, Bond Bank with its distinctive brand will position itself to make the most of these opportunities and be better placed to comprehensively serve its niche of professionals and business people. The Bank will significantly increase its presence geographically by strategically locating its business offices in every state and major town in the country, thereby consolidating its growing market share. The Bank intends to expand its branch network to over 80 locations within the next three years.
Simultaneously, there will be considerable investment in information technology that will ensure complete bank-wide integration and consistency of service.
"Consumer credit will be an area of focus for us in the future as we plan to develop ways to make such credit more accessible and flexible for our target clientele of professionals and business executives. In addition to our current services, we plan to enlarge our investment banking services to cover a full range of capital market and asset management services. The Bank will also engage fully in the business of insurance, leveraging our unique style and professionalism into delivering the highest quality service in this area. Our goal is to create an institution that provides a comprehensive mix of financial services to its diverse clientele.
"There is certainly no doubt that Bond Bank has embarked on what is already a remarkable journey, having quickly developed a reputation as one of Nigeria's premium brands.
Our strategy will create value for investors in the short term, by positioning the Bank as one of the winners from the accelerated consolidation of the banking industry. We will create wealth in the long term by producing competitive returns on investment and substantial capital appreciation for investors. The Bank plans to become publicly quoted on The Nigerian Stock Exchange in mid-2006 through a listing by introduction, which will provide liquidity and better valuation to shareholders. This will further broaden the shareholding base and enhance the
Bank's profile and financial flexibility.
"It is with this encouragement that the Bank looks up to the future, promising to continue on the path of legendary service delivery to all its esteemed clients and providing superior returns to all its stakeholders", Darlington proudly declared.
Although, some concerned observers have also expressed worry that these set goals for a young bank such as Bond Bank in an unpredictable environment such as Nigeria may be very ambitious and are wondering whether public funds would not be tied to the goal, but as earlier argued, time will tell. However, looking at what it has been able to achieve in such a short period, if given the opportunity, the bank holds promises that would see it through as long as it does not depart the part of good ethics.