In this interview, the Managing Director and Chief Executive of FBNQuest Merchant Bank, Kayode Akinkugbe discussed the positive result of the Bank for the 2017 financial year. He highlighted the major achievements of the bank and projections for the next financial year.
- The bank recorded a 25.7% increase in PBT in Given the economic challenges in the country at the time, how was the bank able to achieve this?
We are all familiar with the challenges the economy faced. Given the diversified nature of our business, some divisions were more impacted than others. The corporate banking and fixed income trading businesses, in particular, were all able to capitalize on the opportunities that emerged. One important thing to note is that having a sufficiently flexible balance sheet will enable you to capitalize on the situations that present themselves – even in a very difficult environment. So, with that sort of foundation, we were able to grow revenues and PBT between 2016 and 2017.
In 2016, we had a 9-month contribution from our investment banking business while in 2017, we had a full year. In addition, the acquisition of our Asset Management and Securities businesses were immediately financially accretive even after just 5 months. This enabled us to ultimately grow Group PBT. What was also very rewarding was that by the acquisition of these businesses, we further diversified our revenue base and I would say, enhanced the quality of income. This is because when you have more income from an Asset Management business, it is more stable annuity income than the slightly higher-risk investment banking income. So ultimately, we have been quite pleased with these acquisitions.
- You talked about acquisitions, are you referring to the acquisition of FBNQuest Asset Management and FBNQuest Securities?
Yes. FBNQuest Asset Management and FBNQuest Securities became subsidiaries of FBNQuest Merchant Bank in October, 2017.
- What does the acquisition of these two entities mean to the bank?
Primarily it was done to broaden our product platforms across board. Our aspiration is to become the preferred investment bank and asset manager in Nigeria offering the full spectrum of merchant banking and asset management services. We have already built the investment banking arm of the business. The acquisition of FBNQuest Asset Management, in particular, has enhanced the quality of our revenue and broadened the product base, as I mentioned earlier, while the Securities business has also broadened our product offering to include equity brokerage services for our various clients. It is just another step in fulfilling the ultimate vision, and we believe both businesses are pivotal to the achievement of this vision.
- Are you looking to acquire more entities in the near future?
We remain open to considering new opportunities to grow our business and enhance shareholder value. This is something we may consider, but we are also mindful that acquisitions can be challenging. It is not necessarily the only strategy to grow a business.
- How does the 2017 year-end result, position FBNQuest Merchant Bank in the investment banking sector?
We already have a strong position, and the 2017 numbers further confirms it. We are and continue to remain a leading Investment Banking franchise and money manager. This is underscored by both our financial performance, as well as independent recognition from global and local professional institutions – over the past 5 months, we have received seven awards which are in recognition of the impact and size of transactions delivered by our Investment Banking business.
The benefit of having a business that offers a broad range of services to clients is that regardless of challenges, certain businesses will perform well even in difficult times. This entrenches our position quite frankly, and gives us another sort of wind to grow, leverage and ultimately build a bigger business. The Asset Management business, for example, is very exciting and aligns entirely with our proposition to not only help people grow their businesses but as they acquire wealth, we can help them find solutions to preserve that wealth.
- Looking at the positive results in 2017, what will be your projection for the next fiscal year?
Well, we have a stronger macroeconomic backdrop, but we also have elections which create some uncertainty. Our expectation, however, is to continue to grow whilst being mindful of the risks.
- You mentioned broadening your portfolio. What kind of products and services does FBNQuest Merchant bank offer and how are they unique beyond what the competition offer?
I like to look at it in terms of the broad range of services we provide which includes strategic advisory services, capital markets, trading/brokering securities across asset classes, developing investment solutions and securing assets. This is done through our various divisions or subsidiaries, including Corporate Banking, Investment Banking (which includes Financial Advisory, Debt & Equity Capital Markets, and Debt Solutions), Sales (which includes Institutional Sales, Wealth Management and Affluent), Markets (including Securities Trading, Currency Trading, Derivatives Structuring, and Research) and Asset Management.
We are unique because we have a culture that is reflective of our heritage and pedigree, which is trailblazing. As you know, First Bank is the pioneer financial institution in the country, and we draw on that heritage to create an environment where staff are encouraged to be entrepreneurial and grow their respective businesses.
- Talking about your heritage from First Bank, we know FBNQuest was formerly known as FBN Merchant Bank, what informed the transition?
In 2017, FBNHoldings adopted the ‘FBNQuest’ prefix as a unifying brand name for all entities within the Merchant Bank and Asset Management subsidiary group. We felt it was important to have an identifier for all the businesses that fall within the Investment Banking and Asset Management cluster of FBNHoldings, and that was something we fully aligned with.
The acquired companies (formerly FBN Securities Limited and FBN Capital Asset Management) were also re-named FBNQuest Securities Limited and FBNQuest Asset Management Limited respectively, in line with the strategy. The companies remain separate legal entities with their respective corporate governance structures so the transition has been smooth. Although the FBNQuest brand name was launched in 2015, the re-naming was only recently implemented to drive a stronger alignment with the go-to-market strategy. We have since commenced several initiatives to drive understanding and clarity about our businesses, as well as what we have to offer.
Internally, the change has fostered a unified culture which emphasizes service excellence, with a clear focus on building a mutually beneficial engagement with customers and our shareholders. We are collectively focused on building a strong and consistent brand experience and becoming a premium employer which will attract, develop and retain the best talent in the industry on one global brand platform.
- Beyond the positive result achieved last year, what would you say are some of the innovative initiatives and key achievements of the bank?
We had a major technology transformation program which is to upgrade our technology and enhance efficiencies, and we are now at the tail end of that project. In addition, as we become more immersed in the digital space, cyber security becomes paramount. In 2017, we completed our ISO27001 certification in Information Security Management Systems. We also completed our Business Continuity Management Systems certification (ISO23001) last year. These are successes we are very proud of because we did it in a relatively short period of time. We also continue to make investments in upgrading the skills of all employees, to ensure that we continue to foster a positive culture of high performance and strong leadership within the organisation.
- Looking at the current state of Nigeria’s economy in terms of attracting foreign investments, what opportunities do you see?
Opportunities might be limited at this time because of the forthcoming elections. However, interest rates are still attractive relative to other emerging & developing markets. The reality is Nigeria cannot be ignored, since Africa is seen by many as the last frontier, and we have the demographics and a strong democracy. There are significant opportunities almost everywhere you look – whether it is in the infrastructure space or agriculture. Nigeria cannot be avoided so we are very optimistic that post-elections we will see a resurgence in foreign investments.
- Leading a transition is usually quite demanding, how has the journey been for you so far?
It is really about people. If you have good people you can achieve anything. Over time, we have seen the importance of different parts of the business and how they contribute to our overall success. Whether it is having the right governance structure, processes, or technology, I think it is really about giving people the chance to take ownership.
Our brand values speak to working in sync, empowering people and being impactful. I’ve found that if you give people that opportunity, they feel excited to come to work.