The Managing Director and Chief Executive Officer (MD/CEO) of Unity Bank, Oluwatomi Somefun, in this interview, talks about the struggles of the bank in the last three years and declares that, “It’s a new dawn for everyone at Unity Bank.”
Can you shed light on why it appears Unity Bank has stagnated for a while?
Let me just give a brief background of the bank and some of the things we have been doing because it’s nice to put things in proper perspective.
Unity Bank is a product of a merger of nine legacy bank in 2006 and the biggest in that merger is the old Bank of the North. Others were NNP, First Interstate Bank, Intercity Bank, among others.
I wasn’t part of the management then. Perhaps something should have been done correctly or differently, because at the time of the merger, there was an opportunity to sell off a lot of the legacy loans. We would imagine that each of the nine banks had their fair share of none-performing loans and all kinds of things that would happen in a merger.
We have seen mergers in this country. We know of the merger between UBA and STB. I was part of that merger. I know how long it took us to integrate and I believe even right now the integration continues. It never ends in the life of the organisation.
We have other mergers and accusations and you can imagine between two to three entities the amount of work and the amount of issues that arise. Then imagine the amount of work and the amount of issues that will rise from the merger of nine banks which were operating on their own.
Why did the management move the bank’s headquarters to Lagos?
At the time the headquarters of the bank was decided to be in Abuja, it came with its attendant issues, because most of the commercial banks were headquartered in Lagos. The bank has its image crafted for it as a result of that one. So it was deemed to be a northern bank; that limited the kind of business and also limited, to some extent, patronage until I will say 2015.
We also struggled with different issues like management, staff and the biggest was legacy rules, legacy none-performing loans.
What happened to AMCON’s window for offloading bad loans?
At the time of the merger there was an opportunity to sell loans to the Assets Management Corporation of Nigeria (AMCON), maybe because of the merger this was not done at the time of Unity Bank.
I think Unity Bank sold only less than 10 billion lot of loans, a lot of loans were returned to us by the way by AMCON. I guess because the merger was going on it wasn’t possible to handle t all those issues simultaneously, so the non-performing loans lived with the new entity.
Up on till 2017, Unity Bank had the highest non-performing loans (NPL) issue in Nigeria. At least we can say we are number one on that one. At a time, we had 98 per cent of NPL. I don’t think anybody could beat us on that one; at that time.
When we came on board in 2015, when you have an NPLs book and at the same time you are still accruing interests and charges over the years, you are just spoiling the NPLs of the book because even the principal is not performing and then you keep on accumulating interests and charges.
In 2015, when we took over, we decided to be truthful to ourselves. We could not continue to accumulate interests on loans that were not performing. If you look at 2014 and 2015, there was a huge decline in revenue because we took decision not to earn interest on NPLs, so we stopped that. If you look at the result, you will see a huge decline in revenue, apart from whatever was happening in the industry, we took that decision.
Secondly, when we looked at 2014, there was Profit After Tax (PAT) or Profit Before Tax (PBT) of 38 billion reported. A lot of the profit of that period came from these same loans that were not performing. So the sensible thing to do was to reverse the entire profit that was recognised and reported. We had to write back and revise the previous year’s profit from 2015.
It wasn’t something that we could do at a go. As we were discovering we were writing off. Perhaps we were the biggest customers complaints centre because customers kept taking us to that window because there were issues with overcharges. As those issues were coming up we were refunding customers from current income. Remember that those income had been recognised even before now; that will explain to you why it looked as if profit had been declining.
How have you managed customer retention in the face of this challenge?
Unity Bank has recorded recognition, customer’s acceptance or public acceptance and patronage in the last three years of this management.
However, you will not see a reflection of that in the revenue because of the things I mentioned to you. When you don’t have a good loan book or capital, you have to become creative and do things that your limited capital and resources allow you to do.
At the same time, you have to spend money to grow your business, so you are struggling with revenue at the same time you have to spend money to build a good franchise so that when business comes you have the capacity and the platform to take care of it.
We have invested in good people to the extent that we can get good people. The bank was struggling with eBusiness. All of us know that to get the right demographics, look at the demographics of banking today, we hardly had any young person banking with Unity Bank, expect those who had their accounts when they were youth corps members and as soon as they finished the youth service, they moved on to other banks. I don’t want to mention those banks.
The people that have been banking with us are old people. We still have a lot of loyal customers; even the loyal customers will have accounts in other banks and use you for convenience. However, the best thing for us is to reach out to the next generation because the future is in the next generation.
How do you attract the next generation? You give them what they want. They are not interested in your ambiance, they don’t go to the branch; they are not interested in your finances; they don’t really care. What do they care about? Convenience.
So we came out with a product for youths, convenient and easy to use, simple and all of that. If you follow our story since the beginning of January, we have launched an aggressive plan at least as much as our capital and resources would allow. We have launched an aggressive plan in reaching out to the youths, we have done some campus rounds.
Even the issue of staff as due to the merger, each of the nine banks came with anybody. There were people who had not been promoted because they were in some remote places and nobody remembered them. There were people who actually were not performing and who were just clogs in the system.
Therefore, in the last three years, some staff were promoted. We have brought in some strategic people. General employee happiness is coming back gradually because these are some of the issues that will affect performance of any institution, and we have tried to do that.
We have tried to create a balance so that it will not look like a northern bank. Being a northern bank is not a bad thing because it means that we are strong in agric; that’s the thrust of the current administration, and we hope that trust will continue, we are very strong in agric, we were number one in agric when it wasn’t popular and nobody was touching agric.
We have been approached by the wheat farmers association, we are doing a lot of interesting things in the agric space and by the grace of God, when we have more capital to deploy, we will really participate in that space.
We did not inherit any bad or serious huge oil and gas and energy loans as a lot of people did, we were not played with that. Today, whatever happens in that sector, Unity Bank is insulated. We had our share of bad news, but those bad news where from different sectors. There was no concentration in the power or energy sector.