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Stanchart Seeks to Lure Back Lost Clients - MD [interview]
Jun 22, 2009 (Mmegi/The Reporter/All Africa Global Media via COMTEX) --
Backed by good service delivery and a pedigree of being part of an international brand, Standard Chartered Bank Botswana was once the leading bank in the country. But it has fallen behind the pack and given way to First National Bank Botswana as the largest player in the market in terms of profits.
Although Stanchart is still healthy and scoring double-digit growth figures, it has lost some of its former prestige to the point where a sizeable number of its customers have heavily criticised it.
Some of them say it is the bank's service delivery that has let it down, others say it is lack of innovation in bringing the latest products such as cellphone banking, some yet say Standard Chartered has been overtaken because of its firm conservative approach to business at a time when its competitors have been more robust and aggressive.
Here Mmegi Staff Writer BRIAN BENZA sits down with Stanchart CEO David Cutting for an hour in his office on the fifth floor at the bank's headquarters on Gaborone's Main Mall to find out what may be ailing the former market leader.
How do you think the bank has performed since you took over at the top?
I am quite happy and proud of the bank's operational performance since my arrival in May 2007. Except for a modest decline in our operating profit in 2007 compared to the 2006 result, which was attributed to the Lobtrans fraud, our year-on-year growth has been in double digits. Our recently released 2008 results confirm this positive trend. However, I am less proud of our performance as a service provider.
What are you doing to improve that?
We are aware that our service has deteriorated in the past couple of years and we have received a lot of criticism, especially with our ATMs. We are now working hard to improve the quality of our service. We have put a lot of expense and effort into refreshing the look of our branches. We have replaced all our ATMs and are in the process of extending this network to 50 machines from 42. In the second half of this year, our customers will be enjoying M-Banking, Internet Banking and e-statements.
Our bank is in a good shape and ready to build on the solid platform of a new operating system that has provided the bandwidth we needed to launch much-needed electronic products. A lot of our customers left us and went to other banks such as FNBB because of the products they were offering. Now that we are going to have those products, we hope to convince them to come back. It's our job to do that.
How have you faired in terms of competition with other banks since you are now lagging behind in terms of profits?
Our competitors have been stronger in the retail segment, particularly FNBB, as they have aggressively pursued Internet and cellphone banking. So I do agree that there has been a noticeable gap there but I believe we will start to close that gap this year as we are also introducing those products as we have upgraded our operating systems.
So you think your fortunes will change by copying what others have done?
No. Standard Chartered will never be what I might call a 'me too' bank. We have always led in this market. We are the ones that first introduced ATMs in this country as well as the concept of Direct Sales Agency.
And do you think you are still the market leader?
Well, being a market leader isn't necessarily an objective for us. What we have done is we have gone back to look for new products that are not available on the market since all our products have been duplicated. We need to keep some advantage. Another reason for the gap between our competitors and us is that we have not been as aggressive as our competitors in growing our personal loans in the last 12 months because we thought we had reached a stage where our exposure in that market was too high. So we have tried to manage our growth conservatively.
Now this year we are trying to grow our SMEs business and we think we are going to succeed there because it's a sector that we have been less competitive in and so our competitors have been able to do more. We have also come up with a lot more creativity in that sector and we have invested a lot of resources. The SMEs sector should also do well for us, particularly at this time when diversification of the economy has become a priority and the sector is going to be the engine of growth.
But SMEs have not grown at the expected rate and so has diversification?
I think it will be a matter of taking our market share from our competitors. Even if the market itself does not grow, we hope we can convince some people to join us from other banks. We believe a lot of small businesses are now strongly looking to the Asian market and that is where our advantage comes in because we have a significant presence in the Asian market.
Speaking of SMEs, you have launched quite a few SME products in the last couple of years, how have they performed?
We are very pleased with the public's response to the many products we have offered in the last couple of years. Our campaigns have been successful and provided the momentum for the growth of our Wholesale and Retail businesses. Our Straight 2 Bank cash management product has won international awards and many of our corporate clients have embraced it. We have steadily refreshed our lending and trade finance products for SMEs.
Last year, we launched the 'Savings Revolution' in Botswana which was designed to encourage and reward medium to long term savings while at the same time bringing attention to the importance of saving power and saving the environment.
We have carved out a niche for ourselves in the management risk associated with changes in commodity prices, interest rates and foreign exchange rates. We have chosen to lead with the education of our customers on these derivative products before selling them as a form of risk mitigation.
And last year you launched your credit card, how has that done?
We are not entirely ecstatic about the performance of that product. It has not done as well as we would have wanted. Our competitors also have that product and the market is still very small. So I think given our share of the market, we have done fairly well, but it would have been nice to have more numbers.
With 70 percent of your business being retail, how has the global financial crisis affected you?
Like any other business, you would expect to feel some kind of effects. But quite frankly, we have not experienced any tremendous deterioration and we don't expect to make any provisions in the diamond sector this year, and in retail it's quite negligible. I also think we have seen the worst of the retrenchments in the mining sector and some mines have begun production again and new business is coming from that sector. Last year, the mining sector was largely a supplier of liability to the banking sector because they had liquidity and now this year they are borrowers which is also business for us.
We have also the opportunities to do derivative transactions in the market; a lot of hedging based on commodity prices as well as foreign currency exposure. We are adequately capitalised and enjoy surplus liquidity in pula, which gives us the short-term flexibility and the debt capacity we need to help our customers with their financing needs. Our strategy going forward is to continue our conservative approach to the management of risk, to make sure that the risk/reward balance is reflected in our pricing.
What are your views of the banking industry in Botswana, particularly with regard to interest rates, loan repayment defaulting and the thinking that the industry is now over-banked?
The banking industry in Botswana is in good shape. None of the banks have experienced the stresses and strains which the global financial crisis has caused for some financial institutions in the West. Retrenchments and downsizing by some businesses would have created new concerns about defaults on unsecured lending. The industry needs to be prepared for this.
Having said that, the default rates are still relatively low but will of course vary from institution to institution. I am happy with the competition that is coming into the market at the moment, although I believe new banks will struggle to penetrate. I certainly would not want to be a new entrant into the market at this point.
The crisis will also separate the 'A' banks, the 'B' banks and the 'C' banks in terms of capitalisation, liquidity and overall strength. I think going forward the customers are going to think harder about where to put their money, and this is where new banks will need to work harder to attract new customers.
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