Stories by Blaise Udunze
Starting a bank involves a long organisational process that could take a year or more, and permission from the Central Bank of Nigeria (CBN), as the highest regulatory authority in Nigeria’s financial system.
Extensive information about the organiser(s), the business plan, senior management team, finances, capital adequacy, risk management infrastructure and other relevant factors must be provided to the appropriate authority. The proposed bank must either meet the requirements for the three different tiers of banks, namely, regional, national or international.
Part One of Two:
- Determine a need. Why are you opening a bank? Are there local community banks in your area? Any business will only succeed if there is a market. People in the area need the product you are trying to sell them.
- Appoint a board of directors. Typically, this involves about five to 13 people. The board of directors oversees the strategic plan of the bank and makes sure employees at all levels comply with company policies and federal regulations.
Although board members should not be directly involved with the bank, a few of them should have previous banking experience. Appoint a few members over the regulation level in case someone drops out for any reason.
- Make sure you have adequate starting capital. CBN proposed a minimum capital base of N100 billion for banks that operate internationally in the country. Among the three tiers of banks, the lowest capital base – N15 billion – set aside for those classified as regional banks. According to the classification, banks with the maximum capital base could operate internationally while national banks whose operations are confined to the country will be required to have N25 billion.
On the other hand, regional banks which are allowed to operate in a minimum of five and a maximum of 10 contiguous states are required to have N15 billion. Also, banks’ present structure is expected to evolve into a holding company model, with the parent company holding investments in banks and non-core banking independent subsidiaries.
- Create a business summary plan. A financial projection is required during the charter application process. This may require a three to five-year business plan and projection.
You need to demonstrate that a new bank would profit. Showing the plans for growth shows investors what they can expect as a return on their investment (ROI).
Before you can open a bank, you have to prove you’ve done research into your competitor’s businesses and that you can either come up with a comparable product or somehow provide a beneficial service no one else has thought up yet.
- Hire a legal team. Opening a bank can be a very arduous and confusing process with many legal regulations that must be followed and applications that must be filed. Hiring someone familiar with this process can expedite your preparations and help you cover all your bases.
- Establish a risk management infrastructure. This must be done before the bank is opened. A risk management structure “identifies, measures, monitors and controls the risks involved in an institution’s various products and lines. These risks include, but are not limited to, credit, market, liquidity, operational, legal and reputational risk.” Hire the best people who know how to assess for risk and keep policy and procedures in place that keep your employees aware of the next scheme, fraud or bad decision.
- Hire a public face. A community reinvestment specialist responds when your bank is called to show how the bank is contributing to the community. They must be knowledgeable in the rules and regulations in place and be able to respond appropriately to concerns about the bank. They must also report in their meetings with you the ways in which the bank would be appropriately steered toward investment efforts.
Part Two of Two:
Making it Happen
- Find a place. Now that you have completed all the initial steps and got your bank approved, you need to find a suitable place. It’s of vital importance for you to familiarise yourself with all potential customers and competitors around you.
Find a place with smooth traffic. Choose a position with a great deal of markets and residential buildings. Seek out a location with other competitive banks as little as possible.
- Purchase the space. Since you have found an appropriate place, you need a place to establish your bank. Make sure there is enough room for at least three personal banker offices, a seating area, an inside teller area, a drive-thru teller and a vault. This can be accessible to both the tellers and deposit box customers, or the bank can house separate vaults. The vault needs to be far into the bank, not near the door. An internal and an external ATM, and a security guard station.
- Come up with an elevator speech. An elevator speech is a less than 30-seconds pitch that just rolls off your tongue. When someone asks you what you do, you should be able to recite this from memory, with feeling and gusto, and convince them they need this product too. You are going to have to spread the word about your bank.
- Establish the appropriate relationships. Work with money transportation specialty companies such as armoured car services, as well as any government bodies, such as regulators.
- Establish what the bank will offer. Doing an analysis of your community and its demographics can help you determine what services the bank should offer.
- Monitor your cashflow. Always have between 22.5 per cent as cash reserve ratio and 30 per cent liquidity ratio held in CBN coffers as a protection for the worst events.
- Invest in your community. Growing the money means spending the money. Your bank customers depend upon you to know when to apply the money to a construction loan for a new hospital and when to put the money into a growing investment. Risk is always a factor, but knowing what is an acceptable risk is part of the game.
- Establish an online banking option. Many people do their banking online, so an online banking system is necessary for running a successful bank.
- Hire excellent employees. For many banks starting out, reputation and word of mouth is pivotal to their survival. Having competent bankers with strong financial and banking backgrounds gives the customers confidence when placing their money. Placing friendly tellers with excellent customer service skills leaves a lasting impression on the customers, making them want to return.
GTBank redeems $500m Eurobond
Guaranty Trust Bank Plc (GTBank) has announced the redemption of the outstanding portion of its $500 million Eurobond Notes due May 19, 2016.
The bank had in February 2016, successfully issued a Cash Tender Offer to repurchase any and all the outstanding $500 million 7.5 per cent Eurobond Notes as part of its effective liability management strategy.
The tender was the first of its kind involving a Nigerian corporate in any capacity in the international capital markets and was well received by analysts and investors.
The securities were issued by GTB Finance BV (GTB Finance) – a direct, wholly owned subsidiary of the bank – on the back of an unconditionally and irrevocably guarantee of the bank.
A statement from the bank at the weekend explained that at the expiration of the tender offer, an aggregate principal amount of $126,586,000 of the securities were successfully and validly tendered.
“Upon final maturity of the Eurobond in May 2016, the outstanding principal portion of $373,414,000 as well as the coupon value of $14,003,025 were redeemed using the bank’s available cash reserves,” the statement added.
According to the bank’s Managing Director/Chief Executive Officer, Mr. Segun Agbaje, despite a difficult operating environment that characterised most of the year, especially when viewed against the backdrop of short dollar supply, the bank continued the implementation of its effective liability management strategy with the successful completion of its any and all cash tender offer in February 2016 and subsequently, the redemption of the outstanding portion of the $500 million Eurobond Notes due May 19, 2016.
Launched in May 2011, the $500 million Eurobond was the first sub-Saharan Africa financial sector benchmark Eurobond without a sovereign guarantee or credit enhancement from any international financial institution.
“Over the years, the bank has continued to leverage its deep understanding of complex business scenarios to undertake large ticket transactions in financial advisory, structured and project finance, balance sheet restructuring, debt and equity transactions.
“A few of the transactions successfully executed by the bank include $350 million Eurobond offering in January 2007, issuance of the bank’s $824 million Global Depository Receipts in an unprecedented concurrent global offering in the domestic and international capital markets, which culminated in the listing of GTBank on the London Stock Exchange, the first Nigerian company and first sub-Saharan African bank to be so listed,” the statement added.
Union Bank unveils 3 new look branches in Delta
As part of its drive to provide simpler and smarter banking solutions to its customers and prospects across Nigeria, Union Bank has unveiled three of its newly upgraded branches in Delta State.
The three upgraded branches of the bank unveiled are located at Sapele Road, Effurun; Sapele/Patani Road Ughelli, and at Otite Junction by Ajogodo Road in Sapele, Delta State.
In his opening remarks, the Chief Executive of the bank, Emeka Emuwa, said, “we are here to formerly unveil our newly upgraded branches. What we are doing is in line with our transformation journey that started a few years ago. We want to let our customers know we have setup innovative platforms, products and services so they can bank at ease.”
The innovations, he said, came as a response to customers’ feedback and the bank’s commitment to serve its customers better.
Speaking to newsmen, Union Bank’s Transformation Director, Joe Mbulu, called on customers to partner the bank in utilising the innovative platforms, saying that customers can now do banking transactions from the comfort of their homes using the UnionMobile and UnionOnline applications with mobile devices and computers.
Mbulu said: “As you can see, there is a difference between what you see today and what was here before. We present a simpler, smarter bank. Beside the ambience being more comfortable for our customers, it also demonstrates the fact that we’ve invested in technology. Customers can come in and go out in a short time; get attended to with more improved services.”
Commenting on the smarter and simpler status of Union Bank during the launch at Patani Road, Ughelli, HRM, Ovie R. L. Ogbon, Ogoni-Oghoro 1, the Owhorode of Olomu Kingdom, commended the bank for being reliable even in stormy and turbulent times.
Heritage Bank backs financial inclusion, launches ‘comic book’
Heritage Bank Limited has reiterated its support for the nation’s financial inclusion project aimed at raising the level of financial knowledge as well as rendering services at affordable costs.
The bank is set to launch a comic book to drive financial inclusion among children. The book launch is one of the highlights of the bank’s Children Banking Month 2016, which is part of financial literacy campaign to commemorate Children’s Day celebration on May 27.
In a letter conveying details of the Children Banking Month 2016, the Managing Director/Chief Executive Officer, Heritage Bank, Ifie Sekibo, said: “May 27 has been set aside nationally as Children’s Day and to honour you, our leaders of tomorrow, for the second year running, we at Heritage Bank have declared the entire month of May as Children Banking Month.
“We are dedicating this month to you, our young customers, because of the important position you hold in the destiny of our great nation, Nigeria.
“Our theme for this year’s celebration is ‘Taking the Early Lead’ and aligned with this is our financial literacy campaign geared towards equipping you with the requisite knowledge to make you a remarkable leader in future. This is also in keeping with the bank’s vision of creating, preserving and transferring wealth across generations.”
“I personally want to congratulate you on behalf of the management and staff of Heritage Bank ahead of the Children’s Day celebrations on May 27 and to urge you to stay in school and stay focused on your academics.
“I also want to let you know that you can be anything you want to be in future if you listen to mummy and daddy and also to your teachers in school. As the buds of today and the stars of tomorrow, we are counting on you to make the difference in our great nation,” he said.
“Throughout the month of May my colleagues in the bank will go round a great number of schools throughout the country imparting knowledge on elementary finance and at the same time, we will also invite some of you on an excursion of the bank to let you see firsthand, the workings of a modern day financial institution. I have also made sure that you will be entertained if you walk into any of our Experience Centres.