Nnamdi Okonkwo, managing director/CEO of Fidelity Bank Plc had a clear definition of what he was appointed to do at the bank when he took over the mantle of leadership on 2nd January, 2014. “I would like to be remembered as a CEO that didn’t disappoint his predecessors but took the bank to a greater height than where they left it and also set the stage for whoever is taking over from me to do better”, he said.
He took over the leadership of the bank from his former position as executive director of South Directorate at Fidelity Bank where he was in charge of commercial and consumer banking. The bank clearly needed someone who knew not only what to do but also the boldness to take on new measures to reinforce the growth momentum after a sharp slowdown in gross earnings and a drop of 58% in net profit in 2013.
Okonkwo’s definition of the task ahead was quite reassuring to both shareholders and staff of the bank, providing the confidence that directors needed to forge ahead and the motivational force that staff needed to put on the right spirit for a bank headed for a greater height. Taking the bank to a greater height after a deep plunge in profit that was induced by revenue constraint looked really like a big mountain ahead of the bank at the beginning of 2014.
Fidelity Bank’s new CEO brought with him a wealth of experience which spans 26 years in the banking industry covering various key banking operations such as corporate finance, corporate banking, commercial and consumer banking. Before he moved over to Fidelity Bank, he was chief operating officer in the Ghanaian subsidiary of United Bank for Africa. He appears to have laid the bank on his strategy table, strengthened the revenue functions and amputated excessive cost channels. The bank strategist also worked with Standard Trust South Africa and Guaranty Trust Bank.
The results of this corporate surgery began to show in just 12 months. The revenue slowdown in 2013 was induced by a drop of over 17% in interest income from core lending business. Okonkwo treated this problem by stepping up the bank’s main earning assets – loans and advances and investments as soon as he assumed office in 2014. He accelerated growth in loans and advances and did a massive expansion of investment assets after two years of a sustained drop.
The dressing of the earning asset portfolios quickened earnings performance at the end of 2014. From a drop of 17.4% in 2013, interest income from loans and advances rebounded to a top record growth of about 42% in 2014. With that, the bank achieved an accelerated growth in total interest income from 9.2% in 2013 to 21% at the end of 2014.
There was also a strategic pruning of the main expense lines that caused the profit drop in 2013. Interest expenses had grown more than three times as fast as interest income in 2013; it became flat in 2014 and has since continued to grow well below interest income. This move lifted up net interest income by close to 59% in 2014 and another 25% in 2015 – some of the top growth records in the banking sector.
Interest cost continued to show its favourable behaviour in 2016, declining by 7.2% at the end of the third quarter against a moderate increase in interest income. The bank has therefore continued to improve net interest income, which has helped to moderate other critical costs such as impairment charges that again posed major challenges to banks generally last year.
Loan loss expenses were the major culprit in the profit drop in 2013, having jumped by nearly 77% in that year. Okonkwo’s first year in office saw a drop of over 47% in credit losses and despite a rise of 34% in 2015, loan loss expenses have remained well below the 2013 peak. These steps have enabled the bank to enhance the average yield per naira of assets and improve the ability to convert revenue into profit.
The outcome is a dramatic change in the reading of Fidelity Bank’s bottom line from a drop of 58% in 2013 to a leap of 79% in 2014. Fiscal 2015 was a bad year for banks and companies generally, when upsurges in interest and loan loss expenses caused sharp profit falls in banks. Okonkwo was able to shield his bank from the earnings volatility in the year and succeeded in sustaining profit recovery for the second year. The ability to achieve relative stability in earnings through the business cycles is the hallmark of effective corporate leadership.
He obtained a B.Sc. degree in agricultural economics from the University of Benin and also holds an MBA in banking and finance from Enugu State University of Science and Technology. He is also a graduate of the Advanced Management Program (AMP) of INSEAD, the business school of the world, France. He has also attended various other senior-level programs at other renowned institutions.
Operating difficulties facing banks and businesses worsened in 2016 but Okonkwo applied his expertise in the business to minimize their impacts on the bank. Loan repayment difficulties are a normal issue in a declining economy and banks were at the receiving end of it in 2016. Management’s quality is tested by the ability to maintain operating stability in the midst of a volatile operating climate.
Cost increases were generally stronger in 2016 than in the preceding year and revenue growth isn’t expected to be as good as in 2015. Okonkwo has however continued to show a high degree of earnings stability. He has continued to keep Fidelity Bank on the path of profitability as per the bank’s third quarter interim report last September.
Two major developments enabled him to moderate the impact of rising impairment charges on the income statement. One is a cut down on interest expenses, which improved net interest income and therefore improved the capacity to absorb part of the impairment charges.
The other is a moderate improvement in gross earnings, which was made possible by a top record growth of 26% in loans and advances to over N729 billion at the end of the third quarter. Fidelity Bank is one of Nigeria’s top 10 banks by asset base with a balance sheet size of about N1.4 trillion last September.
For these outstanding achievements, Okonkwo has emerged one of Top 10 Magazine’s top 10 CEOs of the year, 2016. His ability to steer the ship of Fidelity Bank through stable waters in the midst of the raging economic tempest has earned him the white flag.