In the subscriber section of Tekedia, I wrote how GTBank (Nigeria) plotted one of the finest corporate redesigns in Nigeria’s banking sector and became the category-king. Today, across many indicators, GTBank is the industry leader. Its market capitalization can buy more than 80% of our local banks excluding Zenith Bank. GTBank is winning and continues to open new vistas with enviable cost-to-income ratio of sub-45%. To do this, GTBank made a pivotal decision in mid 2000s. That decision has since paid off, evidently. It was a decade-long business strategy with one mission: make GTBank the preferred bank for upward mobile (professional) customers in Nigeria. Today, GTBank is the bank for working professionals. It was not automatic: GTBank was like most new generation banks before 2004. Then, it took off and became a king. (It is important to note that GTBank has been having severe technology challenges these days. Last month, services were down for hours.)
As you look at the data and read banks’ annual reports, you can see trajectories of banks on their missions. Most of the plans take years for the impacts to be visible in the financial statements. Briefly, I explain what some banks are doing:
- GTBank: Many years ago, GTBank wanted to become the preferred bank for Nigerian corporate working professionals. It executed that strategy with some enablers which I have noted here. The bank has some of the most profitable customers in the nation. Interestingly, these same customers are also the cheapest to serve because they are well educated, and can do many things by themselves without the bank support. This remains the heart of GTBank strategy.
- Wema Bank: Wema Bank through ALAT has made it clear that it wants to on-board youthful customers. This business model is still ongoing. By having its ALAT business “partly separated” from the main bank, it wants to become a largely clean bank, a digital bank. This is a nice strategy, and I do predict that in five years, if banks do not curtail their fees, the favorability will drop: bank fees in the nation’s banking sector are skyrocketing. The risk is that there will be many ways to do banking without banks, and solutions like ALAT could be in that equation for young people. My local bank now charges me monthly debit card maintenance fee of N40. That fee comes besides the stamp duty on digital transactions. And there is the monthly N302 maintenance fee. Wema’s future will be finding a pan-African strategy where it can pioneer a currency-agnostic solution that will serve most parts of Africa. That ALAT’s future may not involve Wema Bank at its core. And needless to say that it will take time to bear fruits. ALAT is a startup and must go through its growth phase before the push for monetization begins.
- Diamond Bank: Diamond Bank is deepening retail banking at scale. In Lagos, it is easy to see Diamond Bank associates wearing Diamond T-shirts looking for business. I do think that the bank is working to win through agency banking and that means it wants to be the king of retail. Diamond Bank since it pioneered Diamond Bank Integrated Banking System (DIBS) has been loved by traders and retailers. DIBS fixed a major friction: eliminated the need of moving cash in intra-national trading. With DIBS, traders could travel from Aba to Lagos without having to carry cash. Before DIBS, that was not possible as bank branches were not connected. In other words, if you had an account in Union Bank Aba then, you could not collect money from Union Bank Idumota. DIBS changed that and traders loved that. The bank through its agency banking business is planning for another win. The redesign will take years to yield fruits: the bank has to grow the customer base before it can make money serving them.
- United Bank for Africa: UBA is Africa’s global bank with operations in excess of 19 African countries, the largest of any Nigerian bank. UBA believes that its future will be Africa and it has a leg-ahead of other banks. It has invested massively over the years, building these country networks, and the moments of glory may already be here. In the last two years, the stock has moved from N2.73 to above N9. Its growth is working. Its decision to push into Africa is making it a pan-African bank in the age where integration will be the order of the day.
Other banks have also anchored their businesses on strategic core visions. I will discuss those in the subscriber section. The most fascinating is First Bank which wants to add new 16 million customers within three years. We will examine how the bank could do this, and if that is even possible, by pointing its growth strategy which I think will be in excess of five years to be practically visible. Skye Bank which was clipped by the Central Bank of Nigeria when its ratios deteriorated has sold assets in its non-Nigerian businesses, to boost its balance sheet. Today, it has a clear growth plan. Keystone Bank under the new CEO is working on digital strategy for its future. The most fascinating is what Union Bank is doing as it is clearly linked to Atlas Mara team in Dubai which has invested in the bank. I will discuss.