Sterling Bank Plc was recently honoured by the Nigerian Stock Exchange (NSE) for its efforts in cushioning the effects of the coronavirus pandemic (COVID-19) on the Nigerian people, chief among them of which is the lender’s reduction of restructuring fees on loans. In this interview, the bank’s Chief Executive Officer (CEO), Abubakar Suleiman, shares his experience of the first-ever digital closing going ceremony at the Exchange, why the bank is looking out for people to support during the pandemic and the state of the nation’s economy, among other issues:
You were the first CEO to experience the first-ever digital closing gong on the Nigeria Stock Exchange. How was the experience and how is it different from the regular closing gong ceremony?
Well, we are used to being the first in many things. So, it was quite normal. But what that ceremony tells us is that the world has changed but we can still achieve what we are set up to do. I think the NSE has shown us that it is not only corporate organisations and individuals that are adopting technology but even regulators and self-regulating bodies are leading. It was a refreshing experience and we were able to close the ceremony at the exchange which went very well.
Your bank was honoured for the efforts in place to moderate the effects of COVID-19 on customers, specifically the reduction in loan fees for new and existing customers.
How are you working to mitigate the effects of such losses on your earnings and books?
If you are in the banking industry for the long run, in difficult times, you must be able to put your balance sheet to serve your customers and the economy. I believe we have demonstrated this, not just in serving our individual customers but in coming together and supporting the Federal Government in putting resources together for the fight against COVID-19.
If you keep thinking of the short-term and the fact that you have to keep making profit, chances are that you will not have long-term customers. We are also looking at the opportunities created by COVID-19 to essentially reduce our costs, where it is possible and still achieve the numbers we aspire to.
How have you been coping with the lockdown? I know a lot of the bank’s employees have been working remotely. But you must have been seeing decline in the volume of applications lately, is that so?
The truth is that the financial service is set up to operate remotely if we are honest about it. Human beings will like to have in-person meetings once in a while but the bulk of what we do is to process data and take decisions. So, we process data in terms of payment and over 98 per cent of transactions happen remotely.
At least they are initiated by the customers on their smartphones or featured phones. So payments have continued without much disruption. We are a leading bank in terms of digitizing lending.
For instance, our Specta platform allows you to initiate a lending process which can be concluded within minutes. Also, we were able to process over 50, 000 successful loan applications last year. There is no reason why that business cannot continue. We also built an application known as Do-able which allows people to invest and partnered with a platform called I-invest which allows customers to buy treasury bills. Banks are really set up to function in circumstances like this and we are taking advantage of that.
To what extent are banks like yours considering investment in government securities?
Government securities are part of the investment portfolio of assets you must hold. To that extent, you are required to have a liquidity ratio that is about 30 per cent of your deposits.
And I think government security is the best asset in that class. So we will continue to do that.
Though we are not set up to take deposits and lend to government alone, we are actually set up to intermediate and we have done a good job of that. We have consistently met over 60 percent of the loan ratio set by the Central Bank of Nigeria (CBN) comfortably and we will continue to do that. You cannot grow the economy by just buying treasury bills and that is not what we are here to do.
Moody’s maintains its negative outlook of Nigeria in Q2 but says the capital market remains strong to enable the Federal Government to issue bonds, OMO, T-Bills, etc, but we are aware that the CBN placed restrictions on banks in terms of participating as primary markets. Do you share Moody’s view, especially at this time that the government has signaled plans to intensify domestic borrowing?
Moody’s view is consistent with what anyone will expect from a country that is a major commodity exporter, considering that we are not just having a battle with lower price but we are also struggling with quantity. So, I don’t think rating agencies have a choice at this time. Across board, all the sovereigns in one way or the other have been impacted.
Even the strongest are not as strong as they were six months ago. So that view is consistent. The government’s capacity to raise money from the local market is never in doubt. Let us not forget that aside the banks, there are other strong financial institutions such as pension funds and insurance companies. There are also private investors such as high net worth individuals that have increased investments in treasury bills. So, I have no doubt government will be able to issue bond in the market.
As a bank, are you considering some primary market activities, possibly later in the year given the implications of COVID-19 on your earnings as well as income?
Interestingly, we just closed a commercial paper issuance which was successful. If we have a need for tier two capital, absolutely we will go into the market but at this point, our focus is to double down on the sectors that we have always argued for – Health, Education, Agriculture, Renewable Energy and Transportation (HEART). These are the sectors we are concerned about as an institution and more than anything else, this crisis has shown that failure to invest in those sectors is almost suicidal and it is something that we must do as a nation. And I think it is something every financial institution should support.
The Nigerian Stock Exchange has given a 60-day extension to allow for filing of quarterly financial statements. What exactly will your books be looking like for Q1 considering the dramatic nature of the period?
Financial performance, especially the short-term financial performance will be moderated. It starts with the fact that business volumes have gone down. There are a lot of transactions that have been put in abeyance and until you process those transactions and lend the monies to the customers, you can’t make those profits. Even payment volumes have also slowed down.
If you bank on the state or its ecosystem, you will see a reduction in volume over time. It is fair to expect performance that will be weaker than what we had projected and potentially weaker for most institutions compared to what was obtainable in first quarter of 2019.
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