Heritage Bank Limited has appointed Mr. Akinola George-Taylor as its new Managing Director. George-Taylor takes over from Mr. Ifie Sekibo, who completes ten years at the helm of the bank and was the bank’s pioneer chief executive officer (CEO). In addition to George-Taylor the bank has appointed two Executive Directors (EDs), Mrs. Osepiribo Ben-Willie and Mr. George Oko-Oboh.

George-Taylor would be taking over Heritage Bank at a time the bank has required not only a new face at the driving wheel but also an injection of new funds to stabilize operations and support a fresh start at building a sustainable banking franchise. Heritage bank has been in the sights of analysts for several years because of its over N250bn in negative shareholder funds. The bank’s hitherto weak capital base had limited its opportunity for organic expansion and required deft management to keep it on an even keel.

Looking Back with Foresight

In June 2019 Proshare had highlighted the need for the bank to recapitalize and re-strategize. In a report titled Heritage Bank; The Unmaking of A Deposit Money Institution. The writers pointed to the bank’s brave effort at growing quickly through the acquisition of Enterprise Bank, a legacy bank of the Asset Management Company of Nigeria (AMCON) but noted that Enterprise Bank was a black hole with unknowable poor asset quality. The report highlighted that the purchase of Enterprise Bank was Heritage’s ‘Coup de foudre’ or major misstep with unintended consequences.

According to the report:

“As a way out of its challenge, the bank fell in love, a tragic error. In a bold but ill-digested move Heritage Bank decided to acquire the Asset Management Company of Nigeria’s (AMCON’s) legacy deposit money institution, Enterprise Bank, this was the decision that let all the evil spirits out of Pandora’s box. The buying of Enterprise Bank was the classic example of a Cobra Effect or a situation where a cure becomes worse than the original disease. 

The decision of Heritage to acquire Enterprise Bank for N56bn in 2014 resulted in unintended consequences. The bank’s Board decided to acquire Enterprise Bank from AMCON to rapidly expand the retail end of the bank’s operations and reduce its cost-to-income ratio. The gambit was a disaster. The Enterprise Bank fiasco was designed to add a further 200 branches to the bank’s operations and cut interest expense while improving net interest income.”

Fixing a Problem

Heritage Bank has never really recovered from the Enterprise Bank foray. The takeover set the bank back, as it attempted to resolve the legacy bad loans of the erstwhile bank. At the time, Proshare’s report noted that three solutions to Heritage Bank’s problem would appear practical. According to the 2019 report:

“To protect the financial system from contagion, the CBN may need to move into the affairs of Heritage Bank and any of three actions:

• Wind up the institution with shareholders losing their money (as things stand today shareholder’s funds have been completely eroded) while depositors resort to the National Deposit Insurance Corporation (NDIC) for part recovery of deposited funds
• Find fresh investors interested in the institution and intermediate a best effort basis sale of exiting shareholder interest and recapitalization of the institution as a going concern
• Liquidation of the institution and the running of the bank under a new franchise as a legacy institution managed by AMCON and available for purchase by third party investors 

The preferred solution would appear to be either the second or third options. The second option would be of particular preference as it would not involve heavy ‘menu cost’ by way of rebranding but would involve a new Board of Directors and management staff. The fresh capital inflow would eliminate the need for initial treasury support from public coffers and would likely result in foreign capital inflows which would be beneficial for the local currency while also protecting domestic employment. 

The CBN would have to work fast if Heritage Bank is not to be a dark blight on the Godwin Emefiele-led CBN’s much acclaimed financial sector stability so far. At best, the CBN may have about forty days to bring about a technical resolution of the Heritage Bank situation or it could find itself taking remedial action at a much higher economic cost later than it would now. Heritage banks weak liquidity, impaired shareholder funds and high loan impairment, according to analysts, needs action not tolerance.“ 

Moving Forward

With the appointment of a new MD and Directors, the CBN has given a nod to Proshare’s earlier recommendations, three years after the original Proshare report, the new Exco, buoyed by the anticipated investment of fresh equity in the bank; would help stabilize the institution. 

It is now understood that Heritage is at the closing stages of fresh funds investment in the bank which makes the exit of Sekibo, a 10-year tenure limit regulatory compliance move, a bitter-sweet moment. If the deal goes through, it will be a case of a dogged commitment to the resolution of the bank’s problem(s) by the outgoing MD and indeed, the board of the bank.

In his farewell speech to staff members of the bank, Sekibo, noted that “…having established a clear path, and now closed out with the long-awaited capital raise program, the incoming EXCO will benefit from the resource availability structured to ensure funds are being disbursed based on the timetable agreed with the investors”

He further observed that “this approach sets a demonstrable tone, confirming our capacity to engage the market, and maintain the conviction to direct our business, and compelling proposition.”

Closing Views

The Heritage Bank’s evolution from 2013 has been a long hard struggle as admitted by the bank’s founder and outgoing chief executive. However, a brighter phase may be peeping over the clouds, but much will depend on the character and calibre of the new helms people and the bank’s fresh investors. The new financial system realities in an age of fintech, decentralized ledger technology (DLT) and digital banking will set the parameters for how far the bank will establish a heritage of leading practice.  Heritage bank has made investments in these areas and should be primed to compete and usher in a new lease of life.

About the New Directors of Heritage Bank Limited

Akinola George-Taylor, Managing Director, is an experienced banker with over two decades working in the banking and financial services sector. He has a proven track record in managing multi-billion Naira operations.  He started his banking career in 1993 with GTBank where George-Taylor rose to the position of Executive Director in charge of Public Sector Group, Abuja & North Central. Whilst at the Bank, he has held various positions in different business sectors. He was also the Managing Director of GTBank in Sierra Leone between 2005 to 2009. 

Osepiribo Ben-Willie, Executive Director,  is an accomplished banker with over two decades experience of which she has been leading business transformation initiatives at various levels within the financial service space. Ben-Willie is currently the Directorate Head South-South, South-East & Private Wealth Management Team in Heritage Bank Plc. She has worked in the following banking institutions Credite Bank Nigeria Limited, Diamond Bank, Zenith Bank and Stanbic IBTC. 

George Oko-Oboh, Executive Director, currently heads the Abuja and North Directorate Business of Heritage Bank Plc where he plays a pivotal role in the business growth and daily operations of all businesses and transactions as it relates to his area of supervision. Oko-Oboh is an accomplished financial services professional with over two decades of banking experience functioning in various leading business roles spanning Retail, SME, Commercial, Public Sector, Collections, Funding Advisory and Corporate Negotiations.