One year after its creation, Managing Director/Chief Executive Officer, Keystone Bank, Mr. Oti Ikomi, tells Kunle Aderinokun and Obinna Chima that the commercial bank, created through a 'bridge bank' process on August 5, 2011, is positioning itself as a dominant player in the middle market and retail banking segment. Excerpts:
August 5 made it one year that Keystone Bank was established. How will you describe the journey so far?
I must say that it has been an immensely rewarding experience for Keystone Bank, albeit challenging. We have been able to take the business forward and we are quite confident that we are now well placed to take Keystone Bank to greater heights. We must also give immense gratitude to God and all our stakeholders for their support. At the beginning, the first thing that we needed to do was to stabilise the entity. As you are aware, this bank was created through the bridge bank status and we needed to quickly assemble our executive management team and subsequently our board.
So the first thing we did was to stabilise the market place, stabilise the perception, reality and the service experience of customers of Keystone Bank. That was the first thing that we needed to sort out.
Secondly, we needed to make sure that we have our staff fully working with us and we have a range of committed staff. Since then, we have come out with a formal mission statement for Keystone Bank and now, the vision of Keystone Bank is: "To set the pace in financial services delivery, creating utmost value for our stakeholders." And when we made that vision, it was very clear that when we said we want to set the pace, we really want Keystone Bank to be a pace-setter in the industry. By setting the pace and creating value for our stakeholders, we ensure that we bring productivity and enhanced level of business growth.
So, we want to use efficient service as a differentiator for our business. Related to our vision, we also have our mission. The mission of Keystone Bank is: "To deliver consistent superior performance and be the preferred partner." So if you juxtapose both the vision and mission, you will find a common thing, which is how we use service as a differentiator. We want customers to come into Keystone Bank and have a service experience that exceeds their expectations, meets their needs and take them to an enhanced loyalty with the institution. A key element of that is that we are positioning the bank to operate in the middle market and the retail space. We recognise in Keystone Bank that a lot of Nigerians are yearning for enhanced services as individuals. Today, big corporate have services, some of the medium-sized institutions have services, but individuals don't really have enough offerings. If an employee, for instance a clerk in the ministry, who earns about N100,000 monthly and has been working for about 12 years, goes to a bank to seek a loan, maybe to support his wife in setting up a small business, it is not always easy for such people to have access to loan. But in Keystone Bank, we are putting a whole range of offerings so that such people can have access to funds. We also have to be sure that they can repay. All of that is part of how we intend to grow this bank.
As a financial institution, what have been the challenges in the last one year, considering the stiff competition in the industry?
The major challenge that a bank like Keystone faces is really how to ensure that we meet the needs of our customers and grow our market share. We are extremely unhappy and dissatisfied with the current level of market share that we have. I tell my members of staff and executives, that it gives me sleepless night. We have to take this bank to the next level. So it is unacceptable to be where we are now. So how we can grow the business and win an extensive support from large base of untapped customers out there? That is our major challenge.
The other challenge we have was around our operations our information technology (IT) environment. In banking, you have your core banking applications and you have your hardware. So at the end of everyday or every month, there are some programmes you run. In the legacy institution, when they run such programmes at the end of the month, sometimes the system will not be available to attend to customers until about 3pm while the bank had been open since 8 am and in some cases, the system will not be available until about two days. We are very fortunate in Keystone Bank that with the full approval of our board, we have been able to install a new hardware system from IBM, which went through a very competitive process. We evaluated IBM, HP and other providers. So we have installed a new IBM hardware system. As at July 31, 2011, we were able to close our system by 9pm and by 7.35 am the following day, the bank was open to customers on the IT platform.
This is a tremendous improvement. We used to have IT challenges in the past which affected up-time and service delivery, but we have significantly enhanced that. We are also working on our staff to make sure that the right orientation is there for service excellence. There are still areas to work on, but these are all being addressed.
So what are the prospects for Keystone, especially as the bank enters another stage?
As part of our vision, we have a strategic environment which we call "Let's build." We have a target that by 2015, Keystone will be among the top five banks in Nigeria. We are very clear about that and we are using our service model. Being among the top five banks does not necessarily mean top five by balance sheet. You can achieve that through efficiency of operations. We want to improve efficiency on the cost side and then continue to grow the revenue on the top-line. So we are focusing on the middle market, retail market, we are going to go more into agric financing, we are already in the middle of an advisory engagement with the International Finance Corporation (IFC ) and they are giving us trade-lines. We are one of the nine banks in Nigeria that the IFC is working with. So we are quite sure that by 2015, our profitability will be significant and will be able to contribute effectively to the shareholders.
Considering what happened to the legacy bank, what structure(s) have your team installed to retain customers and also in attracting new customers?
The first thing we did was to enhance our IT environment. The second thing was on governance and control. Some of the items that led to the financial intervention in the legacy bank in 2009 were around risk management and poor governance. Keystone Bank today operates a high corporate governance environment. From the Board of Directors led by the Chairman; Mr. Moyo Ajekigbe, who is a seasoned banker, to many other distinguished members on our board and the executive management which I lead.
We have our management committees functioning, our board committees functioning and we have been able to distill and enhance our policies. When we came in, we had to review all the policies of the erstwhile institution. For instance, we have a new credit policy approved by the board. We have a new operating expense approved by the board and we are currently reviewing our Enterprise Risk Management framework. We also have a whole range of new initiatives being reviewed by the board. We have enhanced our control environment. There was a time in the legacy bank that the institution had a very poor record in terms of control.
But today, we have brought fraud to a minimal level in this institution, because of our focus and drive. Some of the unacceptable practices that were allowed in the past are no longer happening now. There is zero tolerance for fraud. So all of these are part of the change process that we have in the bank. We have a very strong 16-man board headed by Ajekigbe and we have four former bank managing directors on the board, retired Attorney-General and other professionals with experience.
Then when you come into the executive management which I lead, I humbly say that my international work experience of over three decades is also put to bear in Keystone Bank. I had 15-year career at a senior level with Citibank across East and West Africa. I used to cover Kenya, Uganda and Zambia for Citibank in transaction banking and I did same thing for West Africa, covering over seven countries for Citibank. Subsequently I worked with Standard Bank as a director covering 17 countries in Africa including South Africa. Then in my most recent function before I joined Keystone Bank, I was Senior Vice-President with Ecobank Transnational Incorporated (ETI) as a deputy head of corporate banking, covering over 30 countries in Africa, including operations in France and other areas. So, that kind of experience enables you to be exposed to best practices, leadership, governance and particularly innovation and business. I am a roll up the sleeves kind of CEO. I always get involved and we work on solutions.
Then I have very experienced executive directors, from Demola Adewale, who is very experienced in control and operations, Yvonne Isichei who is also very strong in retail banking, Shehu Abubakar who is very strong in public sector, Shehu Mohammed and then Sally Uweche-Mbanefo who also has very strong experience from Coca-Cola, oil and gas and finance. So with the totality of this team and our general management team where we also have strong individuals, what you have at Keystone Bank is a mix of season bankers that will bring their collective experiences to the benefit of our customers.
In terms of product development, what have you been able to offer customers in the last one year?
We have broken our bank in terms of our market-facing segment into four front-facing directorates. So we have the corporate banking segment, which handles our large relationships, we have the commercial banking, which handles our medium relationship, retail banking and in the mix we have public sector banking. So, beyond the generic products, we are strong in pushing the electronic banking space and the cash-less Lagos environment as an example. Today you will find out that Keystone Bank in the latest statistics released by the Central Bank of Nigeria (CBN) and the Nigerian Interbank Settlement System (NIBSS) was among the top 10 banks in Nigeria, in terms of active Point of Sale (PoS) machines deployment.
To grow our deposit base, we have just introduced the Keystone Awful campaign. This is a savings initiative to grow and bring in a large number of customers into the bank by giving them innovative services and quick account opening. From there, once they have the experience, they will be considered for credit products. We are also taking a very strong view around retail credit.
We have a new software called CLAIM that was developed in-house, so that once you want to take a loan for things like laptop, generator, you go to your branch, the application will be used to ensure that within 24 hours, you get your approvals. So we are driving liability products, savings accounts, current accounts. We are also driving asset products on the consumer side. We have also streamlined the overall experience in terms of account opening and others when you come to Keystone Bank.
Also we are getting very strong around the value chain in Nigeria. If you look at the corporates in Nigeria, they have suppliers and distributors. We are creating solutions to intermediate that space for them and give value addition to both the suppliers and the distributors who are mostly small and medium enterprises (SMEs), but they will leverage on the good credit ratings of their principals who would be top rated corporate organisation(s).
Beyond all these, we have set up an agric finance department which recently has been re-configured and now reports directly to the office of the CEO, to give it more push.
We would also be looking at non-interest banking because we recognise that our predecessor bank- Habib Bank- had a strong presence, particularly in the northern part of the nation and we need to leverage that.
What about the products you inherited from the legacy bank, are they still in existence?
Yes, there were some old products by the legacy bank. In fact, the legacy bank had over 100 products, they were too many products. You need to have products and also customers must know them. So we consolidated some of them and built on it. We are building on the good aspects that the legacy bank had and you must understand that we are a bank with a network of 200 branches and if you include our service centres, then we are present in 220 business locations in Nigeria.
So how can one describe Keystone Bank?
We would like people to describe Keystone Bank as retail and middle market focused bank. But at the same time, it is a universal bank. So we offer service to corporate, public sector institutions and over the long-term, we are going to be more dominant and more active in the middle and retail markets. But of course we are a universal bank and we also going to have a small investment bank linked to the corporate bank that does corporate financing advisory because we have a lot of projects and we need expertise on this area. Our unique selling point is excellent delivery to our retail and middle market customers and that assurance of easy and quick access to services and other facilities.
What banking model did Keystone Bank apply for following the repeal of the universal banking model?
We are running a commercial banking license; we are not using the Holding Company (HoldCo) structure. We are actually divesting all of our domestic subsidiaries because the CBN mandated that by May 14, 2012, banks should have divested from their domestic subsidiaries.
But because of our peculiar circumstance, there are some sale processes that are ongoing. We believe that by the end of the year, which we applied for extension, we should have been able to conclude or accelerate most of the divestments. In particular, we divested our first entity last week Friday (August 3). That was Capital and Trust Limited. It is a small Registrar firm and we divested it to a company called Apel Asset Management Limited with full approval of the board. So our insurance, healthcare and other subsidiaries will, in due course, also go through divestment. So we are going for a commercial banking license but we also recognise that we have international branches. Keystone Bank is presently in five countries. Apart from Nigeria, we are in Uganda where we own 80 per cent of Orient Bank which has very strong business; we are in Liberia, Gambia and Sierra Leone. So we will be operating as a commercial bank with international representation.
Fitch Ratings, in a recent report on the Nigerian banking industry expressed concern over the capital base of banks in Nigeria considering the operating environment, as well as the level of loan growth. What is your take on that?
From a vantage point and as a member of the bankers' committee and if you have seen the recent reports published by banks which mostly is based on the International Financial Reporting Standards (IFRS), I believe that most banks have sufficient capital to meet their operations.
Specifically for Keystone Bank, our capital adequacy is well above the required minimum. In the case of Keystone Bank, our loan to deposit ratio is very low. We don't give out enough loan and we hope to do more lending. And I believe that is same with the Asset Management Corporation of Nigeria (AMCON) owned banks. We need to grow our assets. Some of banks' investments go to lending and some go to government securities. So, because of that, some banks have large portfolios of government securities and some have low yields. But a number of banks have classified this as Held-to-Maturity and that is the only area where people have be very careful following IFRS, to ensure that there are no market-to-market challenges. But overall, the Nigerian banking industry has actually gone significantly higher than a lot of other competitors in the world. Banks are stable, well managed and of course that does not mean there won't be challenges.
Interbank rates rose sharply, to about 35 per cent last week, as a result of the shortage of cash in the system that followed the monetary policy committee (MPC) decisions. There were also reports that banks had to sell off their forex positions and flipped securities, even at losses, to meet their obligations. Are you not worried about this development?
No, I am not concerned. You see there were deliberate actions by the MPC at the last meeting. The impact of the enhanced cash reserve requirement- the additional 400 basis points, was to tighten available naira and slow down the pressure on the foreign exchange as defined more by the Wholesale Dutch Auction (WDAS) market and by doing that we have entered into an era of tight liquidity.
At the same time, the major source of inflow of funds into the economy which is the Federation Account Allocation Committee (FAAC) funds have not come in. Once the FAAC funds come in and if funds from multinational oil and gas companies, the NNPC and others that bring in additional liquidity into the market come in; you will see rates go down. The situation is under control and there is no need for panic.
But do you think the economy needs such monetary tightening decision at this time that we should talking about how to support the real sector?
Clearly the decision by the MPC was not intended to push rates so high, that was not the whole idea. The monetary tightening was to stem the attack on the naira. But at the same time, there is an implicit goal of low inflation.
So, it is always a careful balancing act between making sure that there is not too much pressure on the naira and at the same time that interest rates don't go too high. This is because if interest rates go too high, the ability of borrowers to access funds cheaply would be retarded. So I think the MPC decision is in order but we expect some corrections, adjustments in the next few days.
So what do you do when you are not on the job?
On a lighter note, I do spend a lot of time with family. I try to, when I can, to go to the gym. But I will like to do more of that. I also read, spend time with the kids and go to church.
It has been very hectic, but now I am an apostle of work-life balance. You must do the job and also have time to do other things and take some rest. I also travel occasionally with the family and we take some leisure.