The Managing Director/Chief Executive Officer of Fidelity Bank Plc, Nnamdi Okonkwo, has disclosed plans by the Nigerian lender to migrate to a Tier-1 bank in the country three years from now.
Okonkwo said the migration is part of the five-year strategic plan Fidelity Bank Plc has set out to achieve. The plan was drafted two years ago, even though the bank began execution in 2018.
According to the top executive who gave a recent interview, the bank’s numbers are showing steady progress towards the actualisation of its Tier-1 aspiration.
“TWO YEARS AGO, WE SET OUT AT FIDELITY BANK TO DRIVE A FIVE-YEAR STRATEGIC PLAN, BEGINNING FROM LAST YEAR, THAT WOULD SEE US MIGRATE TO A TIER 1 BANK IN THE COUNTRY BY 2022. WE WANT TO BREAK INTO THE LEAGUE OF TIER 1 BANKS AND GROW ORGANICALLY, KEEPING IN MIND THAT THE OTHER BANKS ARE ALSO GROWING.
“THIS IS MY SIXTH YEAR AS THE CHIEF EXECUTIVE OF THE BANK AND BY GOD’S GRACE WE ARE DRIVING THE PLAN; THE NUMBERS SHOW THAT WE ARE MAKING STEADY PROGRESS, YEAR-ON-YEAR, IN TERMS OF BALANCE SHEET SIZE, DEPOSIT AND PROFITABILITY.
“AS WE ARE DOING THIS, WE ARE KEEPING OUR EYES ON THE SAFETY OF THE BANK. WE HAVE THUS KEPT OUR EYES ON THE BANK’S CAPITAL ADEQUACY, LIQUIDITY RATIOS, RISK MANAGEMENT FRAMEWORK, GOVERNANCE AND COMPLIANCE PRACTICES, AMONG OTHERS.
“FOR INSTANCE, AS A RESULT OF OUR PRUDENCE IN BUILDING UP CAPITAL, WE WERE ABLE TO CUSHION THE IMPACT OF THE IMPLEMENTATION OF IFRS 9; SO WE TOOK THE CHARGE OUTRIGHT.”
Fidelity Bank is not de-emphasising corporate banking: Okonkwo also used the moment to douse speculations that the management of Fidelity Bank Plc is de-emphasising corporate banking for retail banking. He said the appointment of a new executive director for corporate banking shows how important corporate banking is to Fidelity Bank Plc.
“WE HAVE JUST APPOINTED A NEW EXECUTIVE DIRECTOR, CORPORATE BANKING AND THAT SHOULD TELL YOU HOW SERIOUSLY WE TAKE CORPORATE BANKING.
“FIDELITY BANK USED TO BE FIDELITY UNION MERCHANT BANK AND THAT IS WHY MOST MULTINATIONAL COMPANIES IN THE COUNTRY HAVE CONTINUED TO BANK WITH US.
“SUPPORTING BUSINESS IN THIS NICHE SEGMENT COMES AT HUGE COSTS. THEREFORE, BUILDING UP LOW-COST DEPOSITS FROM THE LOWER END OF THE MARKET HELPS TO SUPPORT LENDING TO THE CORPORATE SEGMENT AT RATES LOWER THAN HIGHER RISK SEGMENTS.
“WE HAVE GROWN OUR SAVINGS DEPOSIT ACCOUNT BASE FROM N75BN WHEN I BECAME CEO ON JANUARY 1, 2014, TO N226BN AT PRESENT.”
Okonkwo said the impact of digitisation has been positive for Fidelity Bank. According to him, 81.5 per cent of the bank’s transactions is now done through digital channels. While the emergence of digitisation first came as a challenge to banks, now its an innovation due to the role it has played in facilitating transactions.
“WE ARE DRIVING OUR RETAIL BANKING WITH DIGITISATION. ABOUT 81.5 PER CENT OF OUR TRANSACTIONS ARE NOW DONE THROUGH DIGITAL CHANNELS. THAT IS WHY YOU WILL SEE US BUILDING JUST ONE OR TWO NEW BRANCHES IN A YEAR.
“IN THE PAST, WE USED TO DO LIKE 15 TO 20 BRANCHES. I CAN’T REMEMBER THE LAST TIME I WENT TO INAUGURATE A NEW BRANCH OR EVEN WROTE A CHEQUE. DIGITISATION HAS MADE THINGS MORE EFFICIENT. STILL, ON DIGITISATION, WE HAVE ALSO TAKEN INTO COGNISANCE CUSTOMERS THAT MAY NOT HAVE DATA TO DO THEIR TRANSACTIONS.
“SO, WE INTRODUCED OUR USSD *770#, WHICH DOES NOT REQUIRE YOU TO HAVE A SMARTPHONE OR DATA TO CARRY OUT SOME BANKING TRANSACTIONS. THIS CATEGORY OF CUSTOMERS DO NOT NEED ANDROID PHONES TO OPERATE THEIR ACCOUNTS, JUST BASIC PHONES.
“THIS HAS MADE OUR COST-TO-INCOME RATIO TO IMPROVE SIGNIFICANTLY. ULTIMATELY, OUR COST-TO-INCOME RATIO IS LIKELY TO DROP BY ABOUT 50 PER CENT BY 2022 AND DIGITISATION WILL PLAY A KEY ROLE IN ACHIEVING THIS.
“HAVING SAID THIS, INFORMATION TECHNOLOGY COMES WITH A LOT OF RISKS. ANY BANK THAT DOES NOT PAY ATTENTION TO CYBER RISKS IS LIVING DANGEROUSLY AND I DOUBT IF ANY BANK WILL EVEN TRY THAT.
“STATISTICS HAVE ALSO SHOWN US THAT EVEN IN SOME OF THE AREAS OF THE NORTH WITH SECURITY CHALLENGES, WE HAVE A VERY HIGH ADOPTION OF ELECTRONIC BANKING BECAUSE PEOPLE ARE SENDING AND RECEIVING MONEY USING THEIR PHONES. WHAT IS A CHALLENGE ACTUALLY LEADS TO INNOVATION AND OPPORTUNITY.”
What it means to be a Tier-1 Bank
A bank’s capital consists of tier 1 capital and tier 2 capital, and the two types of capital are different—there is a third type, conveniently called tier 3 capital.
Tier 1 capital is a bank’s core capital and includes disclosed reserves—that appears on the bank’s financial statements—and equity capital. This money is the funds a bank uses to function on a regular basis and forms the basis of a financial institution’s strength.
Tier 2 capital is a bank’s supplementary capital. Undisclosed reserves, subordinated term debts, hybrid financial products, and other items make up these funds.
A bank’s total capital is calculated by adding its tier 1 and tier 2 capital together. Regulators use the capital ratio to determine and rank a bank’s capital adequacy.