UTB STRATEGIC BUSINESS MODEL

Transcription

1 June

2 UTB STRATEGIC BUSINESS MODEL 1. CONCEPTUAL FRAMEWORK As directors are fully aware, the domestic banking industry has become extremely competitive. This has necessitated the reorientation of corporate business plans as well as a review of conventional practices and processes by all players, big and small. That said, UTB s unique structure and vision will continue to dictate its operating platform. However, the realities of the transforming business landscape also warrant a review of the banks strategic business model. Recent developments in management theory and practices strongly advocate a broadening of the business model to avoid dependence on a sole model market or clientele. Indeed, the experiences of the recent global economic crises give credence to this school of thought. Thus, after a careful appraisal of these realties and near-term future prospects, management has mapped out four initiatives to constitute the basic planks of the new strategic business model. These are; Universal banking, including local and international money transfer services; Small and Medium Scale Enterprise (SME Operations); Microfinance; and Consumer finance and Leasing The ultimate goals of these core initiatives are increased equity value and pursuit of the full potential of the bank. In essence, the ultimate goals can also be synthesized as follows: Liquidity Sustenance maintaining the bank s liquidity on a sustaining basis in daily, periodic and annual prudential reporting requirements; Synergies widening the CORE centres around the operating business to ensure durable competitive advantages; Subsidiaries acquiring and developing new and varied streams of earnings; and 1

3 Human Resources Development nurturing and developing a cadre of outstanding operatives with an inbuilt technical/competence flexibility to deliver exceptional results. 2. IMPLEMENTATION AND DELIVERY MECHANISM As deigned and to be implemented, UTB will continue its universal banking tradition with services, products and instruments that are consistent with market realities and consumer appetites. This is strongly reflected in the current operating blueprint which will be reviewed annually in line with macro-economic developments. Here, the objective continues to be annual organic growth in shareholder value through a calculated penetration into diverse product, customer and geographic segments. In this effort, strict observance of corporate international best practices in governance and full compliance with existing statutory requirements and prudential guidelines, will guide the process. Furthermore, under the guidance of the Board of Directors, management will guarantee and ensure technical performance and output through various strategies, not least, molding the organization to the approved blueprint, rigorously monitoring key operating segments, adopting the appropriate incentives and creating a conducive environment for balanced overall growth. Given the global currency SME operations has gained within conventional commercial banking, any bank would be at a peril not to embrace the euphoria. It is gaining ground and acceptability simply because it makes real commercial sense. In capitalizing on this new wave, UTB has been the first bank in the country to launch an SME pilot scheme and just over a year down the road, it is proving a tremendous success. To date, about Le2.0 billion has been disbursed bankwide and country-wide. With funding finally guaranteed specifically for this product, it is hoped that in the near future a new department be created within the organogram of the bank to more effectively promote and develop this product. Microfinance is another new comer into the main stream of the financial services industry. The rapid influx of a barrage of players into this sub-sector of the economy is indicative of the 2

4 prospects of this product. Again UTBL was the first bank in the country to identity the sinews of this commercial force. But microfinance is a distinct product from SME operations, with different processes and procedures. Thus, UTB decided to pursue this initiative through a separate subsidiary, Finance Salone, starting from a strategic partnership and working towards a full subsidiary. The courting process has however been very long and arduous, resulting in the signing of a Share Purchase Agreement for the completion of the acquisition process in October 2009, a full four years since the expression of interest. Together with its strategic partner, Africap, the bank will pursue this initiative as a stand-alone company. Through this medium, the bank will be in a position to access concessional project funding from both international agencies such as UNDP, UNCDF and MITAF, which have been the principal sponsors at the company s inception. Consumer Finance hire purchase, retail finance, household finance - all describe the type of financing service that caters for the mundane day-to-day items for homes, offices, shops and petty-businesses that either do not fit neatly into the Capital category or are not in the appetite of banks to fund. Yet, this class of necessities such as home furniture, refrigerator, cooking stove, a desk-top or lap-top computer, etc., chair and desk for a start-up homes and business, are all so necessary for modern conveniences of working populations. Undoubtedly, an institutional organized funding source for this sector has been absent since the demise of Bentworth Finance Company in the mid-1980s. And, considering market developments since that time creation of a new institution specifically targeted at this sub-sector will be a welcome development. The addition of leasing operations is also not only consistent with current international structured financing trends but another novelty in the national market. This will come at a time when the mining sector is about to be revitalized, thereby creating a huge demand for both heavy machinery and software products and services suitable for leasing finance. 3

5 3. RATIONALE FOR NEW BUSINESS MODEL Defining the full potential of the business through the articulation and implementation of a blueprint must both have clear advantages and quantifiable and achievable targets. They must also be reflected in both balance-sheet and off-balance sheet performance. In the bank s initiatives already identified, following are some of the advantages: Synergies All four initiatives are with the Banking and Finance industry; they involve the mobilization of capital resource and deposits, packaging and delivering credit in various forms and mechanisms, financial intermediation at all levels of consumer classes and tastes more importantly, products and services in all the initiatives are determinable and measurable i.e. performance based. There are therefore tremendous synergies at all stages and levels of operation, with the ability to shift resources to provide temporary support as and when required. Market Diversification Gross selling of products and services is a distant advantage in the business model envisaged. There is a commonality in both products and services in clientele, in processes and policies, in delivery mechanisms and in funding sources. This characteristic facilitates the emergence of captive clientele segments across the market. Geographic Diversification Branching is very expensive; it is nonetheless necessary and an important factor for organic growth. But given the stage of infrastructural development in the country, the most rational branching policy will not justify the presence of the bank in all commercially viable locations. Thus, an important means of exploiting locational advantages is through product/service differentiation. This is best achieved by a business model that involves a cluster of product/service related companies that adequately exploits such locational advantages. The bank now markets its money transfer service through both the community banks in the country and sub-agencies in all districts. Payments and settlement services are also provided for 4

6 the bank. Similarly, the Finance Salone branches all over the country will be selling both the money transfer service, undertake payments and settlements for the bank and promote consumer finance and leasing products and services in the various commercial centres throughout the country. The cumulative effect will be the creation of an effective and efficient marketing network for financial services and products on a sustaining basis. Group-Think Mentalilty Common in management theory and practice, group-think connotes mass, success, interdependence, operational efficiency and quality. It can equally convey the exact opposite to all and more of these attributes. In its most positive aspects groupthink reinforces the interaction and interpersonal relationships between members of a group (of companies) and the ways and manner in which they conduct business. A common culture, common investment, recruitment, training and compensation, and above all, risk management and problem-solving are some of the attributes of the group structure. The prospects for growth and sustainability are immeasurable. Revenue Base Diversification Membership of a group of related commercial services provides the potential for a diversification of revenue base, savings in common supportive activities such as transportation, communication and other corporate services such as legal secretariat, etc. Share Competencies With proper rapport and respect for individual technical knowhow, and spheres of influence managers within a group can share competencies and enhance the level of both respective and group decision/policy-making. There can also be cross membership on boards of directors resulting in market improvements in corporate governance in the 5

7 formulation, approval and implementation of consistent, rational and collaborative policies and decisions for the companies within the group. There are also better chances of aligning corporate cultures and operating platforms when companies consider themselves as members of a group. 6