The Chief Executive Officer (CEO) of Zenith Bank, Peter Amangbo has identified the quality of ownership and faulty business strategies as the cause of bank failure in Nigeria.
Amangbo said a bank is prone to fail if the lender is established by different characters that have personal agenda. He stated the need to have an anchorman and a unified objective that drives the operation of the bank.
He made this assertion during an interview with Vanguard, citing the number of banks that were in operation between 1988 and 1989, disclosing many of them failed because of lack of focus among the founders. Adding that quality of management is essential to keep a bank in operation.
“To me, I think on a scale, the first thing I will probably say is ownership. If the ownership is not right, forget it, it can never survive. If you come together and have people who are not of like minds, there is no way it can survive. If you check, as at 1988 and 1989, we had about 126 banks.
“How come many of them failed? It is because people of all forms of characters, without focus came together to own the banks. You have your own agenda, and others have their own agenda. The second thing is the quality of management which also will derive from the quality of ownership.”
He also faulted the system of bank shareholders seeking an internal loan, stressing that once a shareholder request for a loan, other shareholders will follow-up. Amangbo gave an insight into how Zenith Bank handled such request.
“When you start a bank and you start borrowing from the bank, it is a problem. We even have it as a policy that time that none of our shareholders should borrow money from us.
“If anything, they were giving us deposits. If shareholder A takes a loan, shareholder B will start looking and asking for his own and so on. So those are the key things.”
Zenith Bank consolidation plan
Last year, Access Bank and Diamond Bank announced a consolidation agreement that will transform the two lenders into one of the biggest lenders in Nigeria and Africa. Despite the move unsettling the balance in the banking sector, Amangbo said Zenith is one of the banks that loves to grow organically.
He said each bank has their own style and structure, adding that Zenith Bank has its own strategy, which doesn’t necessarily mandate Zenith to dance to the same tune or walk in the same path of other lenders.
“The way that you want to dance depends on your style and structure. We have our own strategy.
“If you look at Zenith, we always grow organically; if you look at the consolidation in 2004 during the Soludo consolidation era, many banks came together; some 10 banks, some 12 banks, some 13 banks; it depends on what they want.
“We are one or two banks that did not merge with anyone. Today you are in a better position to compare each of the banks in terms of any parameter whether in terms of profit or size; you can judge what position Zenith Bank belongs. Everybody must dance their own way; some people are better in some areas and you leave them and focus on your own. At the end of the day, it will be better for the industry.”
Consolidation: Crisis or deliberate strategy
Amangbo has described consolidation of banks as more of a deliberate strategy to grow within the ranks than it is of crisis or distress of a lender. In the interview, he stated though most merger and acquisition is regulatory induced, consolidation decision is taken based on deliberate business strategy.
“So we can decide to come together not necessarily being in distress before we can talk of acquisition. Do you know how many companies that the likes of Apple and Microsoft acquire on a regular basis? They would have probably acquired over 100 medium and small fintechs, not necessarily because of the issue of distress; it is a deliberate business strategy.
“I want to remove the issue of distress. The issue of M & A in the banking industry in Nigeria is always regulatory induced. There are very few cases that you can think of that are not regulatory induced.”
Amangbo noted that consolidation without distress shows the sector and economy are maturing. He said a company can offer itself for a merger without having to wait until distress period, but when such offer is on the table, the companies involve must weigh the value proposition and corporate benefit.