By Omodele Adigun
It is no longer news that humongous bad debts currently stare Nigerian banks in the face. But what seems to be news is a new dimension that Mr Ikechukwu Peter, the Country CEO of Cititrust Financial Services, says has a hand in the proliferation of non-performing loans (NPL) sitting in the books of most financial institutions. According to him, wrong classification can make loan go bad from day one!
His words: “The truth of the matter is that one thing that makes loan go bad is lack of effective monitoring. Of course, the structure of the loan is something that should be looked at. For example, you can not class an LP loan to become a regular term loan, otherwise, the loan will become bad from day one”.
At an interface recently in Lagos, Peter explains what makes his company tick and various potholes which financial institutions need to avoid while granting loans.
COVID -19, while it was a blessing to some, it was a curse to some. It came with a lot of effects; it came with a lot of issues. But for some, who were already positioned, it became a launching pad to the next level. The cases are there; the stories are there. A very good example is the Zoom platform that we are all aware of now. They make a lot of money during the lockdown because people were then subscribing to the platform. As far as Zoom was concerned, COVID -19 was a blessing. Now, why was it a blessing to them? It was simple! They were positioned. For businesses that have been hit by COVID-19, and by extension, the harsh economic challenges in the country, I have just two words for them: Get positioned and get into effective collaborative partnership. Positioning could mean a lot of things. It could mean expanding your horizon or capacity and your outlook in the way you see things. There are things you thought are not important. But the truth must be told, there were companies, it may amaze you to know, that did not take the issue of IT seriously. In this 21st Century, they just wanted to do things in the old usual traditional way. They thought it was okay for them to continue that way. But right now, it was no longer okay. In fact, it would be detrimental to your growth and to your survival in a system like this given the COVID-19 scenario and even the harsh reality in the economy. So you need to be positioned in terms of getting IT infrastructure in place. It is important.
A lot of times, people think that it is all about mobilising capital. “If I get money, I will get things done. That is fine! That is also very important. You could still raise the capital you want to raise but if you don’t get positioned, the capital would come and go away. But if you get positioned, you may remain where you are, business would just flow to you.
They also need to b positioned in terms of collaborative partnership. They can not afford to function in silos; they can’t afford to function as an island on your own. You need partnership; partnership within and partnership outside. There is a need for companies to begin partner with their colleagues in the industry. You can’t take that away.
The truth is that what grows business is sustainability. This is so because we don’t want to be a flash in the pan or a shooting star that just appear, shine and then fizzle out. We want to come and stay and shine. I always tell my fellow MDs that we should run the business beyond just paying salaries. It goes beyond that. It has to do with shareholders’ value over time. The value of the business when you met it, after six months, what is the value? Even if I decide to divest from the business, am I going to make capital gain from it? That should be in the consciousness of every Managing Directors. The business must come with returns on capital appreciation.
So in terms of strategy, we have taken steps in terms of ensuring that these businesses are effectively capitalised, with effective strategy to also extend their market share. By so doing, you just ensure that your business continues to grow.
We are a member of Cititrust Group, and the name of our parent company, which has global representation, is Cititrust Holding Plc with headquarters in Ikoyi, Lagos. There are 11 functional entities outside Nigeria: we have presence in South Africa, Ghana, Botswana, Rwanda, Kenya, Liberia and so on. We are also looking at spreading our tentacles to the UK and the US. The entity that takes care of Nigeria is Cititrust Financial Services. It is an investment company that has 10 functional subsidiaries. We started as a lending company to take care of the deficit gap. But as we engaged our customers, we discovered that their needs actually became wider. We started meeting people who were not actually looking for loans, but who needed investments; who needed to grow their wealth; who wanted to trade in stocks; who wanted to do a lot of things in the financial services space. That led us to realize that we needed to spread our tentacles and effectively cater for the needs of customers and stakeholders along the line. We began to look into investment banking space; mortgage banking space; microfinancing space and finance house space. When we looked at these areas, we clearly discovered that they are peculiar in their own ways. So we told ourselves that we needed to look at how we could actually cater for some of these segments across board whether at the lower level or middle or high level. That led us to the need for us to have our subsidiaries that address the specific need of our customers and stakeholders across board. That is why we have 10 functional subsidiaries that look at different businesses. We have investment bank, mortgage bank, microfinance bank and stockbrokerage firm. We have the regular lending company and we have HMO. It is like one stop shop financial supermarket for whatever your needs might be. There is a subsidiary that will cater for it.
In the microfinance space, we have been able to penetrate the unstructured and the unbanked area where others would not touch and our risks are minimal. Our exposure has been within the threshold of the regulatory requirements. By regulation, you are not supposed to have non-performing loan/exposure up to 30 per cent.What we have is not even up to 3 per cent.All we needed to do was to put proper control structure in place and as we give to that space, we always get our money back and people are doing their businesses at that level. The effect has been more than cyclical and we are positioned to do more as we proceed . The truth of the matter is that one thing that makes loan go bad is lack of effective monitoring. Monitoring begins from the point where you disburse these loans. If you don’t monitor properly, you will discover that even customers who have the capacity to repay will not pay. I got my experience in the commercial banking. I discovered that when it comes to playing in that sector, because effective monitoring is not in place, that is one thing that makes loans go bad. But when proper control structures are there, your money will come back. Yes, some people always like to play funny. It is normal. But when monitoring is there, things will not go bad. Of course, the structure of the loan is something that should be looked at. For example, you can not class an LP loan to become a regular term loan, otherwise the loan will become bad from day one. So once all these dynamics are properly understood, the exposure would become minimal and would not go bad.
We bought 60 per cent stake in Omoluabi Mortgage Bank sometimes last year (2020), and the name changed to Cititrust Mortgage Bank. We have created value in that space by creating mortgage for people. In terms of getting to the Exchange at the end of the second quarter, that is , at the end of June this year, as we speak, that plan is in motion. We will get listed on the Exchange at the end of the Q2. Of course, as we proceed in the subsequent years, the other subsidiaries, actually growing fast in their own pace, will also utilize regulatory requirements.; get regulatory approvals, learn how things are done at the Exchange etc. But as far as Cititrust is concerned, the Group is going to get listed this year.
As we speak right now, our microfinance bank subsidiary has that online lending platform. It is still being tested. But it should be able to go live before the end of this month (April). The name of the bank is First Option Microfinance Bank. But we have got regulatory approval to change it to Cititrust Microfinance Bank. For our Finance House, they are also putting on the online lending platform in place. That should go live between now and the end of June. That will actively be a more robust platform.The whole idea of the online lending platform is to still get us more positioned to help us to do business easily and make turnaround time short. Even if there is a lockdown tomorrow, you can apply for a loan from the comfort of your office. You don’t even need any form of interface with people to do business.
As we speak, the Group has about N36 billion balance sheet size. We are looking at growing that incrementally by 50 per cent by the end of this year. We are also looking at growing our lending portfolio; we have risk assets volume of about N12 billion as we speak. We are also looking at growing that by another 50 per cent by the end of the year hopefully. Our filing to migrate Cititrust Mortgage Bank licence from a state to a national mortgage bank with presence in state capitals will be done in 2023. We are hopeful that the migration would continue to commercial mortgage bank.By 2024, we are also looking at getting licence of merchant bank.