CAL Bank’s Strategy for 2015: Digitisation of Banking Products And Services

Interview with Frank Brako Adu Jnr, Managing Director of CAL Bank

Ghana is expected to receive 940 million US dollars within the realms of the IMF program; however in one of your latest interviews you mentioned that this particular solution to Ghana’s economic downturn is the wrong one. Why do you think so and what other solutions would you propose to resolve the current status quo?

I don’t think we should even talk about the current status quo, we should talk about the development of the country. I maintain that we do not need foreign assistance of that kind to develop the country. That kind of assistance, in small amounts, basically gives you a dependency syndrome and it is a beggar mentality. 918 million US dollars in three years to support your home grown economic reform program, for me, is nothing! That’s 306 million US dollars a year! The banks in this country give the government ten times that a year. They put ten times that amount in the economy a year, in oil support and import support for other products and services. For me, I think that we must stop looking to the IMF and to all of these knee jerk, short term reactionary approaches to solving our problems in our development. We have caused the problems ourselves. We must understand what the problems are, how we caused them and we must take a long term view to solving these problems.

What do you propose?

How did Europe do it? How did the US do it? They did it themselves. Tell me one European country that developed using a system of universal adult suffrage, one man, one vote? Almost all of Europe developed under a monarchic system. We have a country of very bright people and huge natural resources. We must not depend on what outsiders tell us to do. If you do that, you are not thinking. We have to sit down and say to ourselves, what is the best system for this country? How are we going to harness our resources and use them for the benefit of this country? I do not think that any foreign advice we get is in the interest of this country. If you tell me to ship out my logs, in other words my timber in log form to Europe and not process it, you are not giving me good advice! And yet for 50 years that is what we did. We have been exporting gold for 120 to 150 years and we still do not process gold here.
So I am saying as a country, let us sit down and think. Ask ourselves what is good for this country.

So what is good for the country? Manufacturing and industry is the way forward. Is the IMF telling you to continue exporting raw materials?

The IMF is giving a knee jerk reaction solution to the immediate problems. It is a short term solution. The question for me is not what the IMF is doing; it is how we can develop this country. How many times has Ghana gone to the IMF? This is the fourth or fifth time! If it was such a smart institution why does it keep failing and coming back?

We are being lazy and we are not thinking. Also, the IMF is proffering the wrong solutions. They know what the problems are, they should tell us as it is and if they are going to give us money, then they should not give us 100 million US dollars, they should give us 5 billion US dollars and say “look: this is what you have to do for the long term.” When they do that then we shall see results. This piddling amount of 900 million US dollars in 3 years is… and with the 26 or so conditions that go with it! Some of which, frankly to me do not make sense.

Let’s talk about the banking industry. The total assets last year increased by 42% so the industry was bound for a positive outlook for 2015. What is the real situation? What is your evaluation on the banking industry in Ghana now?

The banking industry in Ghana has always been vibrant and robust. It has been a very, very tough first half of 2015 and it is going to be an even tougher second half of 2015. The growth rates that you see in the banking sector, although there are maybe one or two individual star performers, across the board the rates will be heavily influenced by the devaluation of the currency and not by real growth. It is basically a matter of revaluing foreign assets and getting a growth as opposed to a real growth rate. When you look at the growth figures and you adjust by the devaluation, and when you look at the returns figures and adjust by inflation, then you realise that the banking sector, whilst robust, wouldn’t be as profitable as it has been in previous years. It is a very painful 2015.

It has been a very, very tough first half of 2015 and it is going to be an even tougher second half of 2015.

How does CAL Bank stand out in the market? How has your bank been impacted?

The first half of 2015 hasn’t been bad; it would be on a real basis, slightly ahead of 2014. That is on an inflation and devaluation adjusted basis. However it was a tough period for the bank. You probably will also see going forward in the sector quite a bit of defaults because we have a very tough macroeconomic environment and fiscal environment with macro high interest rates, devaluation of the currency, uncertainty with valuations etc.

When you say defaults, are you talking about major companies, or the banks?

No, I mean the companies. But of course if the companies default, it affects the banks. If the fiscal and macroeconomic environments are difficult then SMEs are the ones who suffer the most. That is where my fear is.

One of your strategies is to increase your country wide visibility. In this regard according to the set plan, eight more branches should be added to the current network of 22, bringing the number up to 30. Please comment on your current expansion plan.

It is going according to plan. This year we have opened about five branches so far and we are building a new head office building. So we could very well get to thirty by the end of the year, but if we don’t it is not a big deal, we will do by Q1 2016.

In what other ways are you aiming to raise awareness?

The first thing I want to do and I have been telling the marketing guys, is to look at how we can make the brand such that when you talk about banking, anybody thinking about banking in Ghana would think about CAL Bank as opposed to another bank. That is a huge challenge seeing as we have a limited market but you have to start the process at some point. We will get to the point where CAL Bank will be very high up. We have identified a location in Tamale which is to the north of the country to set up a branch. We are going all the way to the far west to set up a branch. We have never been that far west or north before. We have taken baby steps but the intention is to create top awareness of our bank.

You have already mentioned that the stock exchange is one of your current challenges with regards to your share prices. What are the latest developments?

At the last Facts Behind the Figures, I questioned the market, asking why they penalise and punish us for doing well. Nobody knows why, we trade in stock, we pay very good dividends and consistently, we give more information to the market than anybody else, we have two Facts Behind the Figures a year, nobody else does that, we have a conference call with our top 25 shareholders every quarter and nobody else does that… So maybe there is no mystery about the price at the bank, that´s why, maybe we should create more mystery! The market at some point will begin the price discovery process on the bank because I believe that the price should be at least three times what it is today.

Apart from this, what other challenges do you face as an institution?

The run of the mill challenges that anyone faces in a difficult environment like the one that we have. There are too many uncertainties. We have had floods and fire. The filing station that burnt down was a client of mine. But all in all, we tend to be very positive here, we tend to look for opportunities in any situation. There are difficulties but I don’t dwell on them.

Besides the expansion, what are the main points of your strategy for the second half of the year?

I think that fortunately or unfortunately this economy is dominated by foreign banks. That means there is a lot of going back and forth. What we try to do is be very fast and versatile so we base our activities on versatility, quick turnaround, friendliness, client service, responsiveness, digital channels and basically just being with the market or ahead of it in terms of what is happening and the new developments. We are also investing heavily in our strategy over the next three years in what we call digitisation. We are going to do less things manually and provide more digital products and services to our customers. The demographics are important and they tell you that the kids of today are growing up on handheld devices and they are so hooked on them that they won’t do anything without them. I can leave home without my telephone and I’m not bothered, because I didn’t grow up with a telephone in my hand. I grew up on a fixed phone line and there were not enough of those in the country anyway! But these kids are growing up with iPads and iPods. They want to do everything right away, in their palm. We are looking into this because they form about 40% of the population and they are going to be the middle income class of Ghana and so we must make sure we have the platforms and networks to service that market.

How do you differentiate yourself as a bank?

When it comes to the digital platforms, I don’t think that you can really differentiate yourself, I think it is more about how you market yourself. Because trust me, today, there are so many apps coming out every day, almost every week somebody walks into the office and has a new app that can help you do money transfers, so you don’t need any bank point to point. These are all young boys and girls coming out of school and writing all kinds of programs. It is a matter of having an in house team which is savvy and which understands that market and those products and which can determine which ones are best, because they are all running on the same engines or the same platforms or whatever, they are all writing the same programs.

What would you like to have achieved in 2 years’ time when we come back again?

In two years from now we will have finished our 25,000m2 head office building and we will have probably increased beyond the 30 branches because there is pressure on me from my guys here who think we should go beyond that and I listen to them! I would also hope that my net profits would be near to 100 million US dollars and we will definitely be in the top 6, in the top tier of the banks in total assets, which means that our total assets will have to be anywhere from 1.5 to 2 billion US dollars.

Are you going to focus on retail banking?

We will always be a corporate banking franchise but we are going to develop, and we have started to do so, the retail banking sector. The thing about retail banking in a country like Ghana is that it is very difficult and risky because we don’t have an ID system, named roads etc. Because the system is not structured, you deliver retail products on an individual basis as opposed to on a wholesale basis. If you go to the US, the applications are not handheld by analysts, they are put into a system and there is a scoring system and if you make the score you get the loan. Here you cannot do that, if you did that you would have a big problem because people don’t have an address, they are not in any system, they aren’t in any credit referencing system etc. We will never go at breakneck speed developing a retail portfolio but we will keep developing it.

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