Managing Director/CE, Stanbic IBTC Bank Plc
(For his ability to minimize the impacts of operational swings and maintain reasonable stability of the bank, Sogunle is named one of the top 10 bank CEOs of the year, 2019 by The Top10 Magazine.)
Dr. DemolaSogunle, managing director/CE, Stanbic IBTC Bank Plc, faced a number of operating hurdles in the course of the 2019 financial year that halted the cruising speed he has maintained for the preceding three years. He had to engage strategic defenses to minimize the volatile effects of the operating challenges on profit performance.
One of the major hurdles is a resurgence of cost of funds in the face of earnings constraints. At the end of the third quarter operations September 2019, interest expenses rose more than two and half times ahead of interest income, which squeezed net interest income for the second year. There was a fundamental shift in the cost structure of the bank, as the hike in interest expenses happened side by side with loss of deposits.
The bank suffered a sharp drop of about 15 percent in customer deposits at the end of the third quarter, meaning a loss of nearly N120 billion low cost liabilities over the nine months of the year. That provided an alternative route for Sogunle to comply with the Central Bank’s increased loan deposit ratio of 65 percent.
He took further steps on the asset side of the balance sheet to drive a 23 percent expansion of the customer loan portfolio, thus steering the bank into productive lending as envisaged by the regulatory policy. That happened at the expense of investments however – which management collapsed by over 61 percent in line with the intent of policy.
The effort to make up for the loss of huge customer deposits took an aggressive turn and Sogunle resorted to massive inter-bank borrowing. Due to other banks nearly doubled from the closing figure in 2018, which meant an increased dependence on high cost liabilities.
Cost of funds grew by close to 10 percent to over N32 billion during the review period, claiming an increased share of interest income. Net interest income was therefore flat at about N59 billion.
There were challenges equally in the lending field where increased customer lending failed to yield commensurate improvement in interest income. An increase of roughly N3 billion in interest earnings was all that the bank got for over N100 billion addition to the customer lending portfolio.
Yet another hurdle was encountered in the area of loan recovery – which dried up in the year. Net loan impairment write back fell by 98 percent year-on-year at the end of the third quarter.
Revenue weakness was yet another issue for the bank’s management to contend with. Non-interest income that spurred revenue growth in 2018, lost the growth momentum in 2019. Only a marginal improvement was realized, as interest earnings also failed to grow.
Sogunle put up strategic attacks and defenses and succeeded in creating two cost saving centres to stabilize the bank in the face of wide operational swings. He applied a net write back position on credit losses to shield the bottom line from much of the adverse developments in the course of the year. He also applied strict cost controls to save cost in the area of operating expenses.
The cost savings did not fully compensate for the profit constraints the Stanbic IBTC boss faced in the year. They succeeded however in minimizing their adverse impacts on the bottom line.
Stanbic IBTC Bank closed the third quarter operations with gross earnings of N176.16 billion – a year-on-year increase of 4.4 percent. Interest income improved moderately at 3.6 percent to N91 billion during the period. The slow growth reflects a drop in financial investments by 61.4 percent to N154 billion from the closing figure in 2018. Total lending and investing assets dropped from N841 billion at the end of 2018 to N697 billion at the end of September 2019.
With Stanbic IBTC Bank still sustaining a net write back of loan impairment expenses, Sogunle was able to keep his head above waters. However a huge drop of about 98 percent in the net write back position to N90 million at the end of the third quarter hindered him from improving profit.
Despite the drop in net loan impairment write back, the position prevented a devastating impact on profit – which a net impairment charge would have involved. The bank lost 7 percent of after tax profit and closed the third quarter at N55.6 billion.
Stanbic IBTC Bank had achieved strong growth in profit over the preceding three years with sustained drop in loan impairment expenses. A change of pattern from dropping net loan loss expenses to declining net write back posed a major challenge to Sogunle in 2019.
Despite a decline, he retains one of the highest net profit margins in the banking industry. A net profit margin of 31.5 percent at the end of the third quarter still leaves in his hands a big capacity to deliver profit.
For his ability to minimize the impacts of operational swings and maintain reasonable stability of the bank, Sogunle is named one of the top 10 bank CEOs of the year, 2019 by The Top10 Magazine.
Sogunle was appointed Chief Executive of Stanbic IBTC Bank Plc, in January 2017. Prior to ascending to the position, he became deputy chief executive of the bank in December 2015. He served as chief executive of Stanbic IBTC Pension Managers for four and a half years before assuming the role of deputy chief executive officer.
He has held other key positions in the course of his long career with the bank, including head of treasury and financial services, head of risk management and chief compliance officer. He has also managed Stanbic IBTC Bank’s correspondent banking relationship as well as the liability side of the bank’s balance sheet.
Sogunle has also been responsible for overseeing the bank’s money market desk and foreign exchange trading. His responsibilities at some point included managing portfolios for governments.
He holds a first class honours degree in agricultural science and a Ph.D. in land resource evaluation and management, both from the University of Ibadan. He also holds an MBA in banking and finance from ESUT Business School and a treasury dealership certificate from the Chartered Institute of Bankers of Nigeria. He is a member of the Global Association of Risk Professionals.