This Day (Lagos)

26 February 2011

Nigeria: 'I'm Leaving Diamond Bank Strong And Fulfilled'

analysis

He is hardly one to indulge in frivolities. Never one to be caught on the wrong side of the line, you might not be wrong if you accuse him of being too formal and somewhat conservative. He even admits that much. But on this very sunny Monday afternoon, in his office in Lekki, he is surprisingly warm, charming, brisk and business like. He seems every inch a man who has weighed his options carefully and is about to make his move.

At 47, you can hardly fault his achievements after 19 years in Diamond Bank and after what is clearly a meritorious career. Emeka Onwuka retires Tuesday March 1st 2011. He steered Diamond Bank through thick and thin, through consolidation, through the financial crises, through the CBN Special Audit that saw the fall of eight bank CEOs and more.

Onwuka took deliberate steps, ignoring the fleeting allure of the capital market that would later undo many CEOs. It is to his credit that Diamond Bank faced minimal exposure on account of the financial meltdown and the stock market crash. As he leaves the bank behind after just six years at the helm of affairs as Managing Director, he is evidently fulfilled, but would miss the high energy in the banking environment. In his first ever interview, he tells SHAKA MOMODU how he managed the uncertainties of the pre-consolidation, post consolidation, the ongoing CBN reforms, and more.

He grew up in an average middle class family, his father a Pharmacist while his mother was a school teacher. "My father worked mainly for the government all through his career. So, I found myself living with my family mainly in the staff quarters of government hospitals. That the kind of background that I had. And my father being a professional also took education very seriously; of course his major objective for everybody in the family was to excel in school. So, it was very, very key."

Young Onwuka's early exposure to some of the literature and materials his father had available to him which he read to excel were also made available to "us his children to read beyond our school work. And I will say that those materials greatly influenced the choice of my career profession that I undertook subsequently. When I was growing up, I used to read my father's Newsweek and other materials a lot while in secondary school. I was fascinated by global events. And international diplomacy was a major attraction for me to choose to read Political Science in the first place. I wanted to be in Foreign Service, I wanted to participate in international diplomacy at the time."

But his career path was eventually swayed more at of curiosity than by design or accident of fate. "It is also interesting that at a time also because my father had investment in quoted companies, every year you see Annual Reports of companies being posted to him with dividends and all that. And when I read the opinion page of most of those Annual Reports I was always fascinated. You see each time the Auditors sign off, you have under a Chartered Accountant and that was very curious to me, and I wanted to find out who are these people that every report were. And that made me curious and I started looking at accounting and also studying the way they do reports and how those reports were laid out in those booklet and found it very interesting"

Torn between his love for International Diplomacy and his curiosity about the fine lines of Accounting, the debit and credit puzzle. Onwuka eventually settled for Political Science in the University of Nigeria, Nsukka for his first degree in the hope that it will enable him realize his dream of working in the Foreign Service. But no sooner had he graduated, he realized that his hunger for financial qualification was too strong to resist and overwhelmed his desire for a career in foreign service. So, straight from the university and after youth service in Maiduguri, he went back to the University of Benin to do an MBA in 1987.

But an MBA still couldn't quench his thirst and hunger for a professional qualification until he decided to work at the then Arthur Anderson, an accounting firm. "I also decided at the time probably to further my interest in accounting, more importantly because I also wanted to have a professional qualification before having to engage in employment, I wanted to further enhance my knowledge in business, so I decided to go and work in an accounting firm and to train as an accountant. And for over four years, I was with Arthur Andersen which was an accounting firm. I qualified as a chartered accountant in 1991 and after that I felt it was time to start my banking career.

I've told you about political science and foreign service, I've told you about accounting and secondary school subjects. But I have a maternal uncle who was a very successful banker and who I was very closed to. I was fascinated by the very conservative manner that he lived his life after work; it was so interesting to me. And that also got me thinking about banking as a profession and after my banking the next thing was to work for Diamond Bank at a time in 1993".

Parents and Career

Even though he was very closed to his dad, he revealed that he never tried to influence him on his career path, at least not directly. "My father as a person will allow you to make up your mind on what you want to do without directly telling you to do this or do that but he can guide you. But when I became an adult I now realised that it looked like he tried to influence my decision. I remember one or two of his friends speaking to me at a time saying "why don't you do law," but he didn't talk to me directly but one or two of his friends who are lawyers tried to convince me to study law but I said I wanted to do Political Science. On the light side now, I believe that he probably got them to talk to me so that it won't appear he influenced me directly. But I believe he tried to tele-guide that decision even though I knew what I wanted and I went for it.

Onwuka can't readily recall any particular event that shaped his life but believes his closeness to his father was a key influence. "I learnt a lot from my father, I spent a lot of time with him maybe because he was a civil at the time; he was working for the government. So, after work I spent a lot of time with him. I'm the second child, first son. Second child out of six children, I spent a lot of time with him. I learnt a lot from him and I must say that he's a gentle and very conservative person."

Role Models

On who his role models are, he paused, took a deep breath and answered: "Growing up, I think at different times, different people were my models. I've told you about my maternal uncle who was a banker. But I think professionally by the time I started my accounting someone like Dick Rema played a very big role in my professional upbringing right from when I was at Anderson. The current Managing Partner of KPMG, Seyi Bickersteth was my boss and mentor and has remain a mentor to me up till today. And of course, in banking our Chairman and founder, Mr. Dozie would fit that role easily. All I know in banking today I learnt from him within Diamond Bank, so he's a very big role model to me."

Most Challenging Moment/Strategies to Scale Consolidation

Onwuka presided over Diamond Bank as Group Managing Director/Chief Executive Officer at a most critical period in the history of the financial sector, where dramatic new rules and regulations redrew the map of the sector beyond recognition. Looking back what would he say was the most challenging moment of his career? He wasted no time in his response. "I think it is the consolidation; the consolidation was very big challenge to me and also the bank at the time. At the announcement of consolidation exercise in July 2004 we had just about N4.5 billion just under N5 billion and then you had about 18 months to raise your capital to N25 billion.

You can see that it was a long challenge we had at the time. But what we did was that we sat down in the bank and formulated strategies within the context of the activities and the time of the activities that will be accomplished to be able to meet the N25 billion capitalisation. And the summary of that plan which we concluded by August 2004 was as follows: we believed that if we needed to have N25 billion by December 2005, by December 2004 which was just under six month from the date of announcement, we ought to have at least N10 billion and also by the middle of 2005 which was June. We also should have at least N15 billion, so we can have just a gap of N10 billion. If any bank didn't meet those benchmarks at that time, it was going to be difficult for it to have N25 billion by December 2005. Now, for us then, the big challenge was how do you get N10 billion by December.

At the time we were not even a quoted company. We were a private company and if we then try to do an IPO, we realised there's a time required in terms of activities you need to undertake for you to have to do an IPO. So, we decided to do a private placement. So our plan was do a private placement. After a placement, the Year End for us at the time was April. So by April 2005 with a profit retention, we would be at about N18 billion and then seek to merge or acquire another institution to just cover the gap of N10 billion and that's exactly what we did. What did we do with about N5 billion or thereabout as at the beginning of consolidation, we did a private placement and some people raised N9.5 billion by December. So, that took us to about N14 billion or thereabout and with the profit retention for the year ended April 2005, we were at about N18 billion.

We then acquired Lion Bank which at the time had about N3.5, N4 billion and that took us to about N23 billion and also as we were acquiring Lion Bank, we did an IPO and raised about another N4 billion thereabout. And all these was done according to our timetable. By December 2005, we had about N28, N29 billion and that's how we survived the consolidation. You can imagine why you have to go out to prepare yourself because actually if you are going to raise capital you are almost like going for a beauty parade because every other bank was in the market trying to raise money. And so, we had to prepare ourselves soliciting for investors in the bank and by the time we concluded that by December, we were prepared to have our first listing to be listed by March/April 2005 to enable us then do an IPO. So, for that whole eighteen months you can imagine how many hours of sleep we were getting everyday. So, I think that was the biggest challenge I had and my colleagues as well."

He admitted somewhat that consolidation opened the doors to opportunities most banks hitherto didn't know existed. "Well we knew that the market was largely under banked and also very fragmented with about 89 banks vying to explore opportunities in financial industry space. Because each of us didn't have enough capacity prior 2005, we had challenges trying to take advantage of available opportunities."

Banks Running Amok With Cash

After consolidation it seemed as if the banks became saddled with too much cash competing among themselves, immediately started targeting N100 billion and even more. The banks became reckless because they had too much cash than they knew what to do with and were responsible for the bubble capital in the market. His response was measured as he chose his words very carefully. Hear him: "I will say it was to an extent but that's not the entire picture, more so at a time that the entire global economy was facing a very major boom and investors were seeking return both from the developed market and also from the emerging markets, but more for the emerging markets because they had better returns from the emerging market.

Now, this funding that came were used to recapitalized the banks not even at the first round of capital raising within the consolidation but the second round of capital raising that came in late 2006/2007. There were lot of foreign capital that came into the market either into the banks or into the Stock market. And normally when you have such amount of capital come into an economy but with limited outlets, limited outlets in this instance because they all went into the Stock market, of course, that leads to overpricing of assets and referred to the situation of bubble capital you are referring to. But I think what it worse for us was that some of the banks then also entered the market to trade in the market either directly or indirectly all through proxies and that fuel the bubble capital and of course, when the global crisis then commenced in late 2008/2009 when the assets prices then had to adjust you find them having toxic assets in their balance sheet.

So, I think it is the large in-flow of funding coming into a market that has few or restricted assets to take in the funding that may actually caused the crisis for the industry."

Onwuka revealed that Diamond Bank under his watch didn't play the capital market like other banks did. "We didn't. You see as an institution, I don't know what your impression of the bank is but we tried to manage this bank in a manner that we take very moderate risk. We don't take unnecessary risk. The language you hear within the bank here is that we try to meet our objectives, we seek outcomes, but those outcomes have to come out of a controlled process. So, I think what helped us is that we took moderate risk at a time. It is not as if we didn't have our own share of the problems, but we also had moderate problems that we were able to deal with."

CBN Special Audit

The CBN Special Audit was another very trying moment in the financial sector and it affected the entire industry. What did Diamond have going for it that made it scale through. Was it part of this the bank culture of modest risk taking? He paused momentarily, cleared his throat swiveled on his chair.

"You know here we see ourselves as long distance runners and as such we would like to be here as long as there is business to be done in Nigeria. One, we saw the crisis coming we had to adjust our operations in line with our expectations of what is going to come. And as such by 2009 we had a special audit; we were very much prepared for it.

I will tell you that the foreign currency crisis we had in late December 2008, we anticipated it about six to seven months before that time and we started managing down our general foreign policy exposure within the balance sheet knowing that there was likelihood that the Central Bank, the foreign currency provided may not be able to meet everybody's requirement without massive devaluation by 2008 in response to the global crisis which at that time we started seeing signs of the crisis at the banks.

During that crisis we are one of the banks that met all obligations to our customers without any default despite the fact that Central Bank was not meeting the demands that the banks were making on it in terms of foreign exchange purchase. And we also knew that beyond the foreign currency crisis there was going to be a naira liquidity crisis because if you remember the Lehman Brothers crisis wasn't just that Lehman Brothers went down, it also shut down the inter bank market in those other markets. In fact, we were preparing ourselves for a situation that such that this crisis may get to a point that the inter bank market in Nigeria may shut down. So we had trade profitability for liquidity, we had a lot of liquidity.

We were one of the banks that never, for one day went to that Discount Window from the External Discount Window for liquidity support. We never did. We met our liquidity ratio up to that period and we were prepared for the crisis. So that by the time the Central Bank came to do audit by June/July 2008, also we had just ended our year in April, so we were also on our own taking measure and making provisions on our books, that when Central Bank did the audit they asked us to take the addition provision and that's when we took everything that we hadn't taken that year to clean up books. But of course, the market worsens thereafter, and also for the remaining 8 months from December 2009 account we took further provision just to make sure that our books were clean. So, I believe that it is the way we prepared for the crisis, it's the way also we transparently managed our own books that saw us through that examination."

Why did he anticipate the crisis when others didn't? "Well, it depends on information available to them because for us, we saw what was going in the other markets and we knew that such occurrences were bound to occur here. We then tried to build scenarios of what could happen locally and then decided to manage the business ahead of time. So, it depends on information other banks had and also it depends on what segment of the market they were participating in and their own ability to read the implications of those events happening outside the country at the time.

On CBN Directive and Diamond Subsidiaries

Without any hesitation he revealed his bank had taken steps to divest well ahead of the CBN directive, "I think we have made our position clear already, we have issued a press statement to say that we are going to divest from all our subsidiaries. Now, this decision we took ourselves even before the CBN directive because our financial for 2009 became very obvious that the subsidiaries have not grown in a manner that is satisfying to us because the bank is still at over 90% of the group business and considering the resources that we deployed, considering the time we spent trying to manage those subsidiaries we believe that they constitute distraction for management. And also even for our earnings an we also took some losses from the activities of some of the subsidiaries, that in during our Annual General Meeting of June 2009 this time ahead of CBN direction we actually want to shareholders to approve a resolution for us to do away with the subsidiaries, divest in them and we are sticking to that.

Emerging Banking Landscape

On his perspective on the emerging banking landscape after the rescue operation and the proposed sale of the eight rescued banks which some local banks currently bidding for, Onwuka has this to say: "First of all, let me go back to the sanitation we talked about. I know that there are lots of views about what happened at the time. If the CBN didn't do hat they did at that time the market would have shut own. Remember I told you that we were suspecting that something was going to happen even amongst banks. There were some banks who couldn't access, access money, can't access funding through the money market at the time because of capital risk perception of those parties. So that post August 2009, at least CBN has done very well in terms of supporting the eight banks they took over their managements and also they've done well to support the market in terms of the guarantees the issued and liquidity they pumped into those banks. They are also making very good efforts in terms of getting those banks acquired by existing banks and also some other funds managers coming from outside the country as well. I believe that with AMCON and what AMCON is doing currently they have improved the prospects of those eight banks being acquired and I feel that very shortly those eight banks will be acquired and it is envisaged the industry is currently managing the risks.

He revealed that Diamond Bank was for now not interested in acquiring any of the rescued banks "I think for now we are not participating in that process, that's I can say."

Clearly not satisfied, I pressured further. Will Diamond Bank's position not be significantly undermined because it may just become an insignificant player since whoever acquires the banks will become a dominant player in the financial sector. His response was a resounding, "No". He clarifies. "Let me put it this way, size is not the objective for us, our major strategic objective is in area of having a good customer base and making very good returns to our investors. Now, in that process in seeking to achieve a very good return, equity for investors and also having very good customer base, having top class quality service to retain our customers, if we become a very big bank, so be it. We also target to probably have about 5 to 7% of the market share as it is.

Here is Onwuka's response to the notion that Diamond Bank is not aggressive in its strategy. "Well, it's interesting. They used to talk about it that Diamond Bank is not aggressive, Diamond is conservative and Diamond Bank is a deliberate institution and all that. The fact of the matter is that you remember where I started from, I said we are interested in very good outcomes for our institution in terms of meeting our strategic objectives. But most important to us, is that at any point in time as we are meeting these objective we want to meet them through a controlled process because that is what assures sustainability of a business and not necessarily the outcome because if you continue to have wonderful outcome but those outcomes are not achieve in a very structured and controlled manner, it may not be sustainable. Remember I also told you that we see ourselves as a long distance runners."

International Banking License

"We have applied for an international banking license, I don't know if made it clear that we are divesting from our non-bank subsidiaries but we are still keeping our subsidiaries .in Republic of Benin. We have a full license in Republic of Benin and that license is a unified license which allows us to operate in the whole Francophone west Africa zone. With that license we are currently going to Senegal, Togo and Cote d'Voire. So, we are going to retain that business and as such we are applying for international banking license. We already have capital to do that and as I said it's a business we are into already outside the country. But we don't have an aggressive foreign expansion policy. For now, we are only going to be in francophone west Africa, we are not going beyond that, he said."

On whether the bank will raise money from the public, his response was measured but qualified. "Let me put it this way, in terms of the known regulation and I say known regulation because you know the whole industry across the world is undergoing changes, you know known regulation come in terms of how to regulate and survive banking business. In relation to loan regulation as today we have enough capital to do our business in 2011, if there are other regulations, our businesses grow beyond what we planned and there is need for us to seek capital, our first choice will be to seek Tier Two capital. And that's what we do to improve on the leverage."

Igbo Bank Perception

The worrying perception that Diamond Bank is an Igbo bank has persisted despite the consolidation which diluted its shareholding, why has it remain. To this Onwuka appears surprised and tried to laugh it off before venturing a possible explanation. "On the issue of perception, I can only guess. I can't explain it fully. But assuming that you are right in terms of that perception still being there, Diamond Bank being an Igbo bank. I guess because the chairman and founder of the bank is from the eastern part of the country and the character and his person had a strong influence in the brand character, and more so on Diamond Bank, as being a thorough breed professional he is conservative and as such people always look at the bank around the person of the founder, Mr. Dozie."

Continuing, he stated "however, if you look at the institution, there is nothing that suggest from its operation that it is an Eastern bank and I will go on to say that the board membership from time has been very diverse with people from different parts of the country. The initial board members came from different part of the country and at each point in time also, in terms of the top management we've also reflected diversity. Even in terms of operation we are in all the state of the federation. And we also have a very strong presence in the northern part of the country. With the acquisition of Lion Bank, Lion Bank as you know was owned by the old Benue/Plateau states, the Middle Belt and that acquisition gave us a strong footing in the Middle Belt area of the country because most of their branches were also located in that area. So, in terms of operation, diverse, in terms of the board and management, diverse, in terms of ownership diverse. In terms of business location and revenue as well, in terms of staffing as well, I can tell you that there is a significant diversity in terms of those who work in this institution. So I really don't know where that perception assuming it is true, is coming from"

Maybe you have more Igbo customers, I quickly tossed in. He laughed, "I wish we do. But I can tell you that in terms of eastern customers, I can point to one or two banks that probably have more than us in this market but they are not owned by an Igbo man. I wish all the easterners are banking here," he declared humorously.

Strategic Value of Lion Bank Acquisition

On the strategic value that informed the acquisition of Lion Bank? His response was quite revealing. "We looked at the banks that will help us expand our market and also that have particular value to us. It is interesting, Lion Bank are very good retail banking business and I can tell you this say in terms of balance sheet size, the balance sheet size by the time of acquisition was probably about 20%, 30% of Diamond Bank balance sheet size. But in terms of customer base they had about the same volume of account as Diamond Bank and that clearly opened up our retail banking business. And today we have built on that base of Lion Bank and developed a very robust system and market strategy that we are currently rolling out in the country."

Diamond Bank an Institution, His Legacy

"I am leaving behind a very strong bank, strong bank in the sense that we have an institution built on professionalism, an institution built on major core values of ethics, an institution also that has a very strong back office. Beyond raising capitals, we raised capital three times during my tenure and we've done one M&A transaction. We've also two years ago started a process reengineering project in the bank whereby we got consultant to look at the entire back office of the bank and also front office of the bank and we have prepared a back office and a front office for major growth. That's why I said currently we have prepared the bank for leadership in terms of organic growth in this market. So, I'm leaving behind a bank with a strong balance sheet, with a strong back office and also a bank that is referred to in substance as an institution that builds on professionalism and major core values in this market."

What would Onwuka do anything differently if given another chance? He struggled to think. "Em, em I can't really think of major issues now I would have done differently that's why it took me time to think that properly. But probably in terms of execution probably we could have executed differently but in terms of the strategies that the bank undertook during this period I believe it is the right way to go and what we set for ourselves were the right of basic objectives and we also accomplished them. But probably if we executed different we would have had better outcome than we had so far. But I think we are satisfied with the outcome that we have."

On Tuesday morning, you will wake up knowing you are no longer the MD of Diamond Bank, I guess it must be difficult for you to adjust to life outside all the paraphernalia of this office, how would you cope in the first few days? He laughed. "Let me tell you the truth, I think it will be difficult for a man who wasn't expecting to leave office. But from day one I knew I was going to leave in six years. Two years ago I knew I committed myself to leaving by this time and for me, I live a very normal life to an extent within what my work allows me and my office allows me. I live a very normal life and I will just continue with my normal life. Honestly speaking, it won't be any different to me, I can assure you that."

Asked to comment on what he will miss most, he thought for a while. "Well, my colleagues. I worked very closely with over the years because we spend more time in the office than at home. So definitely I will miss them as individuals. And the whole high energy environment in the bank. You know, in emerging markets, particularly in Nigeria, you wake up in the morning, coming to the office, you may have your plans for the day but honestly speaking you will be lucky if at the end of the day you are actually able to execute those plans because a lot of things may come up in the day that totally reshape your plans. I really enjoyed the work and the excitement about it all. I will tell you the truth. Even though it was stressful, I looked at it as if it is play for me. So, work is like play for me. Because I really enjoyed doing the work and the high-energy environment pervading the place keeps you on your toes. It is tense and exciting."

Retirement From Diamond Bank

Why are you leaving the bank at this time when you are yet to attain the CBN tenure limit? He smiled as if anticipating the question. "Well, That is Central Bank tenure limit."

Pushing him further, I asked. Having helped built the bank to this level one would have expected that you stay sometime longer to consolidate but suddenly we heard you are leaving, was there any boardroom squabbles necessitating your leaving? "No, no, I think it is important that you understand our own tenure issue aside from that of Central Bank and I can tell you that this bank have tenure imbedded in our corporate governance code ahead of even the CBN tenure limit itself. Here we have the executive on three year contract and for myself from day one when I pick up this appoint I've always known, I made up my mind that its for only two tenures and this was also known to the key shareholders of the bank. So, I've finish, this is my second tenure and in any case, in our corporate governance code, it is actually two tenure we only have exception of just doing another maybe two years or thereabout. So, we have again in our corporate governance code that you have to stay for tenures of three years.

His Options After Diamond Bank

But Onwuka will not be drawn to disclosing his plans after he leaves Diamond Bank on Monday. "It is interesting, this work is a full time high-energy job; once you are on it you cant think of doing any other thing and all that. So, it is difficult for you to develop options while you are on the job. So, first when I stop working in few days time I'm going take a vacation. You heard what I'm going to do on March 1st, I will begin on March 1st and I'm here to welcome Allen on March 1st and I will be on vacation but with my vacation I will also be working with Allen so I guess I won't be able to run away in March. But once Allen settles down I will then take a deserved vacation and after the vacation I will then explore some of the options that are presenting themselves.

Any clue? I persisted, "I wish I could, but let that be my little secrete until then", was how he waved it off.

Family and Work Pressure

How did the family cope with your long absence from home all these years? He laughed, looked straight as if momentarily transport to the past. "I guess it was very difficult for them but they've been managing. As I said before I visit my home, I didn't live in my house because at the thick of the market in 2007/2008 and probably first half of 2009, if I spend three days in my house in a week I'm lucky. So you can imagine how my family coped."

Philosophy And Attitude

First, is full trust in God and try to live your life as God expects you to live your life. And also believe that you are responsible for your activities both in the short term, medium term and also in the long term. You have to be accountable for all your actions at any point in time. I just believe that whatever actions you take you have to be accountable for them.

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