Nigerian central bank moves to push banks to increase lending will be a damp squib, meaning an interest-rate cut is in prospect, says John Ashbourne, senior emerging markets economist at Capital Economics in London.
Yinka Sanni: We will facilitate business with China
The timing could not have been better. A month after Yinka Sanni, chief executive of Stanbic IBTC, and his colleagues announced that the bank was set to launch its Africa China Banking Centre, the governor of Nigeria’s central bank and his Chinese counterpart announced that the two countries had finalised a deal on a bilateral currency swap first agreed by presidents Muhammadu Buhari and Xi Jinping on the former’s visit to China in 2016.
To execute the deal, in which the two countries will directly exchange RMB15bn ($2.4bn) or N750bn ($2.1bn), the Central Bank of Nigeria appointed four Nigerian financial institutions as settlement banks for the transaction. Stanbic IBTC made the cut, having met the criteria that reportedly included having an operating office in China. Stanbic IBTC is affiliated with the Industrial and Commercial Bank of China (ICBC), which owns a stake in its parent, South Africa’s Standard Bank Group (SBG). That likely made it a shoo-in for the deal, positioning the bank to earn a decent slice of the $30bn in annual bilateral trade volume.
Sanni tells The Africa Report that the Africa China Banking Centre is key to Stanbic’s strategy: “It is important to note that ICBC, which is the largest bank in the world, owns approximately 20% of SBG, our parent. SBG, through Stanbic Africa Holdings Limited, owns 53.07% of Stanbic IBTC Holdings PLC. The Africa China Banking Centre will leverage on our parental affiliation to provide financial solutions and facilitate business between Nigeria and China. We see our role in this regard as pivotal. This will help us tap into the increasing Chinese business opportunities in Nigeria, as well as achieve our objective of being an end-to-end financial solutions provider.”
With the gap between Nigeria’s Tier 1 banks and the rest of the pack widening in the past few years, the opportunity for Stanbic, which is classed as a Tier 2 bank, to capitalise on the lucrative Nigeria-China trade may prove vital for Sanni as he continues the execution of the group’s full-service banking strategy.
An accomplished banker with more than two decades of experience, all spent at Stanbic IBTC, Sanni embodies the corporate culture of the bank’s brand, which places a premium on developing talent from within. Sanni says: “As a service business, Stanbic IBTC recognises that our people are our brand, upon which the integrity and consistency of our customer experience rests.”
Sanni’s career sums up Stanbic’s practice of developing key talent by rotating people to subsidiaries at different stages of their professional development. He served as the pioneer chief executive of the group’s pension and asset management subsidiaries before returning to the bank as head of corporate and investment banking. He was then appointed joint deputy managing director with Sola David-Borha before being made substantive chief executive of the bank after the group adopted a holding company structure in 2012. Last year, he was elevated to chief executive of the holding company and is now responsible for the group’s nine subsidiaries, which include stockbroking, capital market and insurance, among others.
He will have to lean on his experience to steer the group as the economy returns to growth following the most severe recession in a generation. Based on the bank’s performance in 2017, Sanni is off to a good start. The group’s financial results showed that Stanbic IBTC Holdings sustained its growth trajectory, which recovered in 2016 following a dip in the previous year during the recession. Net profit for the group rose by 69% in 2017, an increase of 19% over the 2016 figure. This was achieved despite a 5% increase in the value of loans issued.
Sanni says this was partly due to the improved returns from investments in government securities, into which the bank channelled more of its excess liquidity in the preceding fiscal year. Going into 2018, Nigeria’s bank managers do not want to lend too much too quickly despite the economy showing signs of improvement. This approach is a likely effect of the expansion of bad loans in the banking sector over the past 24 months. Stanbic saw its non-performing loan ratio rise from 6% in 2016 to 8% last year. Its forecast for 2018 anticipates a decline to 5%, and Sanni is confident that the bank will achieve this. “We intend to maintain our credit discipline by responsibly growing our loan book within already identified sectors during the year, while we continue to work on recovering our impaired assets,” says Sanni. The sectors targeted include agriculture, which is the focus of various support programmes from Nigeria’s central bank, oil and gas, and the manufacturing sector.
Reaching out for retail
Stanbic also aims to improve its business in the trade and the retail sectors. It is focusing on “personal and banking customers within an ecosystem” – such as customers in cooperative groups and employee associations, where opportunities for interest on loans and transaction fees are relatively more secure and substantial.
The bank’s retail performance in 2017 was significantly worse than the previous year. It recorded a decline of more than 900% to post a net loss of N16.5bn, down from the N1.6bn recorded in 2016. With the bank’s overarching strategy hinged on retail banking, Sanni and his team have their work cut out to reverse the losses and lay the foundations for a long-term, viable retail banking business.
On the corporate and investment banking side, where Stanbic has a strong history, income grew by more than 200% from N14.9bn in 2016 to N45.7bn. The bank is also acclaimed as being the leading source through which investors funnelled capital into Nigeria’s economy in 2017, importing 36%, or $4.4bn, of investor funds into the country, ahead of the likes of Citibank and Standard Chartered.
Sanni expects the bank to sustain its performance in the coming year: “With the country coming out of recession, we have seen businesses’ performance improve, but we still remain cautious with regard to our lending appetite.”
“Our objective is to be an end-to-end financial solutions provider”