By: Anthony Sedzro
The Managing Director (MD) of OmniBank Ghana Limited, Philip Oti Mensah, says that the bank has learnt valuable lessons from the collapse of two Ghanaian banks-UT Bank and Capital Bank- last month.
While sympathising with the two Ghanaian institutions which are no more, he hoped that such a situation will not occur in the banking sector again.
Philip Oti-Mensah spoke to the GB&F magazine at the Masterminds Social Capital Network’s 5th Conclave at the Labadi Beach Hotel, Accra on August 25, 2017. He was the guest speaker at the event which had the topic,“Corporate Entrepreneurship: The Turnaround Story of OmniBank”. The event was put together by the CEO Network Ghana.
“The first and most important lesson is that, according to the regulator, they started discussions [with the collapsed banks] for a long time so, our first lesson is that we take the regulator seriously. Already we take them seriously but, we are going to take them even more seriously now. When they say regularise your capital adequacy ratio then you have to do it, you don’t have to wait for so long,” the MD said.
He continued: “But beyond that [taking the regulator seriously], we just have to continue to practice prudent management practices and good corporate governance so that we don’t get into trouble.”
Last August, the Bank of Ghana (BoG), the industry regulator withdrew the banking licence of UT and Capital banks because they were distressed and subsequently announced that GCB Bank had taken over the failed banks under a Purchase and Assumption transaction.
Oti-Mensah explained that he wished the two bank brands had not gone under and that the owners had relinquished majority ownership to save the hitherto strong brands.
“Sometimes, what you have to do is simply to give away ownership so that the brand can stay. I just think that it took too long [for the distressed banks to recapitalise],” he explained, and went on, “but before we got to this point, a lot of things happened. I don’t have the full information about what happened but, in the context of Ghana, I will say that banks should be very careful about lending because, once your loan book goes bad, you start losing your capital.”
According to the head of the Ghanaian Bank, individuals and entrepreneurs who do not repay loans are also to blame for the loss of two iconic brands.
“In Ghana, I think that is the challenge. Many entrepreneurs think [of taking] loans (but) they don’t want to repay. So bank managers and bank owners must be aware of this, they must have good policies around lending, they have to take the right decisions but, also, individuals will have to repay their loans. It is important and it is a lesson we all have to learn.”
The unfortunate demise notwithstanding, he believes that there is some positives to the way the BoG handled the demise of the two lenders in order to protect depositors.
“The steps that the Bank of Ghana took to secure depositors funds can only be positive for the general public,” he said.
“So it means that there is a regulator who is thinking about us as individuals. Even though I run a bank I may also have money with another bank, and I am saying that that brings a lot of confidence into the banking sector. We are happy about that regulator’s role,” he added.
OmniBank’s model different
Oti Mensah was appointed MD of the then Union Savings and Loans Company in 2013, then the company was a loss-making institution. However, he and his team set out to turn it around to become one of the top three savings and loans firms in the country within three years, and a universal bank in five years. He revealed that they achieved the savings and loans objective of being among the top in the country.
Remarkably, Union Savings and Loans acquired a universal banking license from the Bank of Ghana in December 2015 – less than the five years after they set out. It eventually re-branded to become OmniBank and now has about 26 bank branches across the country.
This transition from a savings and loans lender to a fully-fledged universal bank last year was the same path UT and Capital banks trod on. UT Bank and Capital Bank were both non-bank financial institutions before becoming universal banks, before their unfortunate demise. But Oti-Mensah says OmniBank’s business model is different and will not face the same fate as the collapsed banks.
“The challenge with the other [collapsed] banks is that it was the other way round – start a bank and use the bank to create other [subsidiary] businesses. And I think all over the world it is always a challenge when you start a financial institution and you start taking money out of it to create other businesses, it is always a challenge,” he pointed out.
OmniBank is a subsidiary of the Jospong Group, one of the largest business conglomerates in the country with interests in waste management, printing, manufacturing, and so on. The MD of OmniBank believes this model sets them apart from the others as the other subsidiaries in the Jospong Group existed before OmniBank came on board.
“So I see a fundamental difference between the structures…up to this date, we [OmniBank] have absolute independence to run the bank and we are covered by the regulator also. It is quite a regulated environment and we are quite okay,” Oti Mensah assures.
The BoG has hinted of increasing the minimum capital requirements for banks soon. According to Oti Mensah, who formerly worked for Procredit in Ghana and other African countries, OmniBank is prepared for any increase in capital.
“The issue is really not about money or finding money because, indeed, there is a lot of money on the global market. If you look at the history of the bank, in fact, there are investors who are knocking on the doors [of OmniBank] but it is more of a question of who do you want to bring into your boardroom? Who do you want to make a shareholder? Who do you want to take decisions with? And for us these are the discussions we are having now,” he narrated.
“Our approach is to wait and really hear what they [BoG] says. Usually they will mention the amount and give us a time frame and that will determine our actions,” he said.
Speaking on the topic of the night ‘Corporate Entrepreneurship’, he believes that an employee who exhibits a strong passion to undertake a task is preferable to someone with an impressive CV.
Explaining the turnaround story, he said that when he took over the helm of affairs, OmniBank needed to fill some strategic roles in the organisation. During the recruitment exercise, some staff were appointed to roles different from what they applied for, based on the passion and ambition they showed at the interview. In the end, those persons turned out to be very effective and strong achievers.
“Corporate Entrepreneurship is not about the Curriculum Vitae (CV) [you possess] rather, the passion and what you want to change,” the CEO asserted. He explained that experience is very good but, organisations must also believe in young people and what they can offer to take the organisation to where it wants to go.
He attributed their own remarkable turnaround to the unique Corporate Entrepreneurship culture he and his team at OmniBank implemented.
Ernest De Graft Egyir, the CEO of the Chief Executives Network, explained that the Network has a membership of more than 500 and the Conclave is a regular meeting at which a member was selected to share their story to encourage and inspire other CEOs and the business community.
“We belong to a group or a club. We do meet to network and get to know ourselves and that is what we mean by a Conclave. This is fifth Conclave meaning we have done it many times and what we do is we get one person amongst us to share his success stories or failures with us so that we get to learn. First class blue chip companies and SME CEOs as well,” says De Graft Egyir.
Why the choice of the OmniBank MD?
“Because there are few people who sometimes blaze the trail. This young man joined a savings and loans firm which was eventually bankrupt but he transformed it into a profitable business and then transformed it into a universal bank. Obviously if you look around our system, these stories are not even there for you to track. In the space of four (4) years…what he has done is a story worth sharing and we believe that people’s stories are the best way to learn,” Egyir said.