By Omoh Gabriel, Business Editor
BY the year 2000, when Platinum Bank evolved from the then Nationwide Merchant Bank, it made as abiding commitment to the market to redefine service standards and make the pursuit of excellence central in every aspect of customer services delivery process.
But very importantly, it approached this assignment with intellectual rigour and strategic poise with a view to transform into a dynamic growth trajectory. But it also recognised that it takes hard work, time and patience to transform into the kind of organisation of its dream.
Hence, it started by investing so much time and resources into building the brand around a set of core values.
Integrity and professional ethics were high in the consideration. A new sense of enterprise was required such that every staff was oriented towards thinking like or becoming an entrepreneur. In doing this, the Bank looked beyond the immediate but focused instead on the long run. Hence, it was not surprising that by 2004 when the Central Bank of Nigeria gave directives on the new minimum capital requirement, the Bank has been re-positioned to play active role in the consolidation that followed. At the end of the day, it entered into a scheme of merger arrangement to form PlatinumHabib Bank Plc. The fusion brought about by this exercise appears to strategically fit into the original projections of managers of Platinum Bank. Hence with combined strength in size and market coverage, the core values already entrenched in the legacy bank was easily activated to synergistically produce a dynamic growth pattern that set the new entity apart among the smaller and medium sized banks. Simply put, the improvement achieved in 2006 was phenomenal and covered virtually all aspects of operations.
However, in order to achieve this and also sustain the pace, the Bank continued in its strategic brand building posture. Its corporate communication methods are very innovative and elicited desired attention and response.
An instance is the advertisement campaign that won the best advert award in 2006. According to the Bank, its corporate and product messages are carefully designed to take the recepient to a world of possibilities. It not only points the recepient of the future, it also implants dreams and put the “can do” spirit especially the youths.
Recently, it launched an incredible reality programme on television called the Intern Show. This has been described as not just entertaining but highly educative. It brings the issue of decision making to the fore and exposes the young ones to a practical leadership/followership and team work environment including intrigues in the Board Room.
Industry watchers believe that this is perhaps one of the best reality shows conceptually in Nigeria (and perhaps a potentially award-winning one even globally), targeted at this critical segment of society.
Although the Bank also gets some direct marginal benefit by way of deposits and awareness from this programme, it also fits into its other educationally inclined corporate social responsibility activities. Sometime ago, it launched what it called the Platinum National Scholars’ scheme under which it assists in the educational development of indigent students right from the secondary school stage.
Apart from educational development, the Bank is also physically involved in the area of environment and sanitation. It takes such investments to be worthwhile and a mark of good citizenship.
Platinum Bank not only invested in the society, it also invested in a Trustee Subsidiary – HNBTrustees and an Associate – HIB Insurance Brokers. Through these alliance companies, it hopes to create the synergistic effect to further its organic growth.
It has also invested in technology and new products development.
Mindful of its commitment to a re-defined service standards, Bank PHB tries to introduce complementarity of the two in ways that ensure convenient and cost effectiveness to the customers. This is true of such products as Platinum Network Account, Platinum World Account, Platinum Access Account, Platinum Now Account among others.
Although the Bank is not yet among the top competitors in the ATM market in terms of numbers and coverage, it nonetheless has invested substantially here. It also has about N755 million invested in computer equipment as at June 30, 2006 to complement branch network expansion. From a total of 35 in 2005, branch network expanded…………..
EARNINGS AND PROFITABILITY PERFORMANCE
During the review period, the Bank achieved gross earnings of N12.9 billion, almost 100 per cent increase in the 2005 figure of N6.6 billion. This was accounted largely for by increases in interest income on loans and treasury placements. In all, interest-related income was 63 per cent of the total, through slightly lower than 67 per cent in 2004 and 2005.
Because direct cost of funds and provision for doubtful accounts rose remarkably during the period, gross margin on funds-related business came down from 52 per cent in 2005 to 50 per cent which though remained above the 2004 43 per cent.
But the balance did very well in managing other generating costs such that it increased only at a rate lower than the rate of business growth, perhaps pointing to the fact that it is beginning to enjoy benefits of economies of scale.
Indeed, our Analysts’ numerical proxy of cost efficiency shows an improvement from 16 per cent in 2005 to 27 per cent in 2006. It was 17 per cent in 2004.
On the earnings side however, efficiency measure fell from 25 per cent to 17 per cent, showing that, though gross earnings rose by almost 100 per cent, total earnings capacity represented by asset based even grew at a faster pace.
But because of the quantum increase in absolute terms and the improved managerial cost efficiency, Profit After Tax leapt from N0.70 billion to N2.42 billion in 2006. This was one of the fastest growth recorded in the industry during the period.
Likewise, earnings per share rose from eight kobo to 13 kobo just as return on average shareholders’ fund increased from nine per cent to 12 per cent. As a result of this impressive performance, the Bank paid cash dividend of 605 kobo per share to shareholders. However, as competition for attention of investors and industry leadership mounts, sustaining high level of efficiency in the utilisation of growing resource base is a challenge that must be met.
CAPITAL BASE AND MARGIN OF SAFETY
Shortly after CBN’s directive of July 2004 on new minimum capital requirement of N25 billion, Platinum Bank in August 2004, became of the earliest to respond in a practical way. It made a private placement which garnered about N4.6 billion. With the success of this offer, the bank matched on confidently to face the challenges of the directive which culminated in the merger with Habib Nigeria Bank in 2005.
On completion of the exercise, shareholders’ fund of Bank PHB initially rose to approximately N34.0 billion. However, with the decision to write-off entire goodwill of N5.96 billion that resulted from the merger immediately, the Bank’s shareholders’ fund as at June 2006, closed at N28.49 billion.
With this wise decision, the Bank was able to free itself from the law that forbids dividend distribution to shareholders on account of this phenomenon.
Meanwhile, the new capital base provided considerably more than adequate cover for the level of risk assets in the portfolio. Adjusted risk assets ratio rise further to 37 per cent in 2006 from 34 per cent in 2005 when it also from 20 per cent in the preceding year. This is much higher than the benchmark ratio of 10 per cent and suggests that the Bank still had significant leverage to expand risk assets and profitability.
This also suggests that notwithstanding that the tremendous growth and improvement achieved by Bank PHB in 2006, capacity for further growth continued to be enhanced. Interim results already declared in the current financial year shows that this capacity is being utilised profitably.
QUALITY ISSUES
In 2006, quality of risk assets turned out lower than in the previous year when the Bank attained its best asset quality level in the last five years.
Specifically, non-performing loans ratio increased from nine per cent to 14 per cent. Although portfolio quality deteriorated, it remained above industry average. Even at that, the 2006 ratio was explained not to be a reflection of current risk management practices but explained more by acquired portfolio.
On the issue of short-term matching of assets and liabilities to meet obligations to customers, reports point to a burst in liquidity in 2006. This is because adjusted liquidity ratio rose sharply from 48 per cent to 76 per cent, just as the proportion of liquid assets to total assets increased from an ultra low level of 34 per cent to 60 per cent. Apparently, management appreciates that sustained public confidence is required to sustain growth in the financial sector. The logical consequence is a share decline in what may be termed portfolio riskiness from our estimate of 62 per cent to 41 per cent.
Although these movements in assets and liability items have salutary implication on quality, yet Analysts believe that what is required is a carefully weighted balancing act such that earnings would be achieved to potential for the interest of shareholders.
What this means is that Bank PHB of 2006 is in firm foundation to sustain the growth achieved during the year for some time to come. Therefore, with the structures already put in place, the only way for the Bank to go is up.