One of the negative fallouts of the fierce competition in the banking industry is demarketing. The Central Bank of Nigeria (CBN) described demarketing as, “Unethical and unprofessional practice of de-marketing colleagues/other banks in the industry by spreading false rumours.”
The banking industry has had two major spells of demarketing, namely in 2006 and 2008. On both occasions, the CBN had to issue circulars to warn industry operators to desist from such unethical practice or risk severe sanctions.
In the circular issued in 2006, the CBN stated, “All banks’ Chief Executive Officers are advised to immediately address all their staff to heed this warning as any proven case of de-marketing by any means and spreading false rumours or negative comments against other banks, will henceforth be sanctioned as follows:
“The bank officer(s) involved in the exercise will be dismissed and blacklisted for unethical and unprofessional behaviour, and The banks’ MD/CEO will be issued with a letter of warming by the Governor of the CBN and the letter will be made public, while a re-occurrence could also lead to such CEOs receiving a stiffer sanction,” the CBN warned in a circular dated April 2012, 2006, and signed by the then Director of Banking Supervision, Mr. Ignatious Imala. Furthermore in a similar circular dated October 21st, 2008, the CBN threatened to impose N10 million fine on any bank involved in demarketing.
New Era of Demarketing
The industry however seems to have forgotten these regulatory warnings. Leveraging on recent developments in the industry, some operators have resorted to demarking, assaulting their competitors with false information about their financial conditions. For example, sequel to the CBN intervention in Skye Bank, the industry was awashed with information that some banks were in distress and that the apex bank would give them the Skye Bank treatment.
This prompted the CBN to issue a circular on July 8, 2016 dismissing such rumours. “The attention of the CBN has been drawn to malicious rumours and unfounded speculations that some banks in the country may have gone or may be going distressed. The CBN wishes to reiterate in the strongest terms that these rumours and speculations are untrue and do not reflect the actual health of the individual banks and, indeed, the entire industry,” the apex bank stated.
Unfortunately, the circular was not effective in dousing the assault of demarketing. The effectiveness of the circular was undermined by the CBN itself due to the way it handled the issue of the N2 billion NNPC funds in the care of the banks. Despite the fact that some aspect of the TSA directive absolves the banks of any wrong doing, as well as the fact that the issue was a case of dollar shortage to meet repayment scheduled, the CBN conveyed the impression that the banks concealed the NNPC funds and thus provide new ammunition for demarketing.
Victims of Demarketing
Most recent demarketing assault had been against some Tier 2 banks, namely Skye Bank, Diamond Bank, Fidelity Bank, Sterling Bank, and Heritage Bank. Despite its 2015 financial statements which indicated profit of N1.1 billion, Gross Earnings of N24 billion and total assets of N483.4 billion, unscrupulous banking operators and politicians have falsely labelled Heritage bank as distressed, and next in line for regulatory action.
In July, the CBN in partnership with Heritage Bank commenced the pilot phase of the N3 billion Youth Entrepreneurship Development Programme (YEDP). Out of over 20 banks in the country, the apex bank appointed Heritage Bank for the pilot phase of this project, which involves disbursement of loans to 1, 500 youths. Also last month, African Import Export Bank (Afrexim) invested $150 million in Heritage Bank.
The investment is designed to support the growth of the bank. That Heritage Bank is considered for such partnership and investment from the regulatory body and a regional development bank indicate that Heritage Bank is financially healthy contrary to the claims of the de-marketers.
Beyond the assault on its financial health, demarketers have also assaulted its image, claiming it is “a Saraki Bank”, with the intent of giving its ownership a political colouration. Yet, even at inception in 2013, Saraki’s family has less than 10 percent in Heritage Bank. More so now that the ownership is more diluted due to additional capital from new investors.
The Price of Success
The main cause of this wave of de-marketing assault on Heritage Bank is its ‘Blitzkrieg’ success in catapulting itself into the ‘Tier 2’ category of banks in the country.
This started with its daring entry into the industry in 2013, emerging from the ashes of the defunct Societe Generale Bank. Despite the pessimism about its viability and ability to compete in a fiercely competitive industry, the bank commenced with a verification exercise and payment of about N21 billion to depositors of the defunct SGBN. A feat considered impossible by most industry watchers.
And while the industry was still grappling with the fact of its emergence in the industry, Heritage Bank made a daring bid for the former Enterprise Bank. In addition to wining the bid, the bank made the payment for the acquisition in record time, while the management successfully integrated the two banks without any crisis or rancour.
Added to these is the bank’s innovative deployment of technology to render banking services in unprecedented style as reflected by its ‘Experience Centers’. Heritage Bank has also succeeded in carving a niche as an ‘SME Friendly bank’ due to its success in promoting and supporting micro, small and medium (MSMEs) businesses, a space largely neglected by the existing banks. The above are the realities which the de-marketers of Heritage Bank are trying to hide from the banking public.