BY ANTHONY SEDZRO
Premium Bank, formerly known as City Investments Company (CIC) Limited, has been launched in Accra, with the bank promising to offer excellent and value added services to its clients. Premium bank which is the 32nd universal bank to operate in Ghana, had been operating as a finance house for the past 20 years, offering loans and other products to mainly Small and Medium-scale Enterprises (SMEs).
The bank, which is majority-owned by the Vanguard Group, acquired a universal banking licence from the Bank of Ghana (BOG) about four months ago and officially launched Premium Bank at its Ridge branch, located in the ultra-modern Ghana Shippers Council head office building on December 12, 2016.
Underscoring the wealth of experience their 20 years operation as a finance house has equipped them with, Kwesi Tumi, the Managing Director (MD) of thebank said that those 20 years taught them that every business has its own unique set of financial needs.“So, as Premium Bank, welook forward to offering businessmen and businesswomen awider scope of products and services well-tailored to meet those needs (which) is why at Premium Bank, you are better off with us,” he assured.
Kwesi Tumi said that many people believe the banking sector in Ghana is already anovercrowded field but,to him, there is still enough opportunity for Premium Bank to make a difference in the sector. He further said that after banking for so many years and acquiring a wealth of experience, especially in the SME sector, he believes Premium Bank will be relevant to the needs of the market.
“We have been dealing with small businesses and, even though we are now a full-fledged bank, we are not deviating from them. We are the mobile money people and, through that, we will give the unbanked population products that will bring them in,” the MD assured.
Unique selling proposition
Premium Bank, while still operating as a finance house and lending to SMEs, popularised an e-portal service called ‘The Helpstation,’which was purposefully designed to help businessmen and businesswomen reach specific goals like: starting a new business, entering new markets, developing new lines of business and building capacity.
This, and other services offered to SMEs, the bank believes, puts it in a unique position against other competitors in the banking sector, especially since much of the Ghanaian economy is informal and controlled by SMEs.
Jacqueline Benyah, the Deputy Managing Director (DMD) of Premium Bank, explained what they have been doing in the past which has made Premium Bankto understand SMEs better, an advantage not available to their competitors.
“You can’t take a backseat to them [SMEs], you know. You can’t assist them from a distance, you have to be actively involved in their business. So you know what they buy, what they sell, you know how much they make, you will go to their offices, etc. If they are buying something, they would want to set up their accounts [so] you are involved with them. They don’t do it and send it to you. Our account officers are with them and they are more like a family. This is because, if you don’t take an active part in what they are doing, it becomes very difficult because sometimes they may not necessarily have the skills to put across,” she says.
“We realised that, for the big banks, [SME banking] was a sub-unit within the banks, so SME businesses were not their major focus. But, for us at CIC, that was our core business; that gave us the opportunity to understand their businesses and cash flows better. So when you are lending to them you look at their cash flows, their needs, the turnaround times for their processes, then you structure your products to suit them. So it was our main business, it wasn’t an afterthought or a sub-unit within the bank and that gave us the opportunity to know and serve them better and it worked for us,” Ellen Aboah, the bank’s Director of Finance and Strategy, explains.
The Deputy Managing Director said that customer feedback played a key role in the bank’s decision to acquire a universal banking licence.In addition to that, and equally important, is the consideration of the amount they would have been losing transferring those SME customers to mainstream banks, for instance for services beyond their power.
Ellen Aboah agreed with the DMD on the reasons for turning into a bank and said the company’s asset size gave compelling reasons for the decision: “Touching on the asset base, about two to three years ago, we realised that we were actually, in terms of balance sheet size, bigger than some of the [universal] banks, about four banks. So we sat back and said, why can’t we also be a bank? If our customers are pushing for it and we have the capacity to do it, why not? That was one of the key things that made us decide that we were going to become a [universal] bank.”
The Director of Finance & Strategy gave an overview of the financial performance of the company so far.
“For capital numbers, currently we have GHS600 million plus, and it is only going to get better and bigger. For total depositors and loan customers, we have over 3,000. The value of deposits is about GHS560 million as we speak now and we use the deposits to finance the loans and earning assets in general. [This is] because for loans, investments, treasury bills and placements in other financial institutions, we are looking at about GHS500 million,” Aboah detailed.
Aboah also gave the profit picture of Premium Bank as at now, as well as plans to up revenues.
“Last year we had about GHS2.4 million in profit. Previous year we did about GHS4.2 million; we started the set-up of the banking project so all the costs that came with it drew down our profits and also our capital came in at a later time, so the full benefit of the profit was not gained in this year as we speak. Come (2017), we will get the full benefit of the capital coming in and then we can leverage on the capital to raise more deposits and do more business,” she added.
She also said: “I mean [we can] expand the products where we will have fees and income coming in because we don’t enjoy that [when CIC was] as a Finance House so that is where we are and that is where we are going.”
Minimum capital requirements
Arguments have been raised that Ghana needs fewer but stronger banks instead of the current 33 banks. There is talk that the BOG will increase the minimum capital requirements for banks very soon. But even that, Premium Bank says their shareholders are prepared for the increase.
Kwesi Tumi, the MD,explained that “we know that our shareholders are readying themselves. The Bank of Ghana, the regulator, sets the rules and we have to abide by them and we are working on it. Everything is up for consideration.
“We came from a capital base of GHS7 million, and we raised GHS113 million, to get to the GHS120 million required of us to become a [universal] bank. What stops us from getting the additional one that the BOG will be asking us to do? We have done it before and we can do it, our shareholders are ready,”Aboah said confidently.
Branches and technology
Now that the bank has opened its banking doors to the public, it promises to open branches and deploy the appropriate technology to reach more customers and serve them more effectively.
For branch expansion, outside of Accra and Takoradi where they are already in operation, the bank is looking at Makola, Tema, Kumasi and Tarkwa. “We chose those locations deliberately so that we can serve the SME markets,” Aboah says.
The bank is looking at eight branches across the southern part of the country in the next one year, ending 2017. “But you know in this day and age and with mobile money and technology and the way it is going, having brick-and-mortar is not the only thing we can do. Yes we will have some branches but we will have a lot of technology as well,” she said.
“I am sure you are very much aware of what is happening with mobile money? I mean it is exploding and so with MNOs [Mobile Network Operators], mobile money companies partnering banks and banks partnering Fintechs (financial technology companies), I mean the sky is the limit. There are a lot of things we can do without necessarily having a brick-and-mortar branch,” Benyah disclosed.