By Babajide Komolafe
New entrants into the banking industry must have a clear strategy to focus on unmet needs otherwise they will join struggling segment of the sector.
Group Managing Director/Chief Executive, Growth and Development (GDL) Limited, Mr. Kola Ayeye, gave this advice in an exclusive interview with Financial Vanguard.
Ayeye cautioned against return to the pre-consolidation era when there were 89 banks in the country, stressing this is not appropriate for the country.
He said: “There is very huge concentration of banking profitability. There is a general sense in which people think that banks are profitable. But the bulk of the profit in the banking industry is made by very very few players. So that would suggest that expanding the number of players is something that needs to be done with care.
“But that said, are there gaps? I think there are one or two gaps that if a new institution that is adequately capitalised and properly run decides to focus on, they can blaze the trail. People are still not taking very good care of the consumer; people are not taking very good care of the individuals. There are a number of areas where there are gaps in the financial system, and some of those gaps non bank financial institutions can meet, some banks can meet. So I will say, even the capital is a deterrent, I don’t think the amount of capital required will make it easy for us to have an excessive number of banks.
“I will say we should not go back to the situation whereby we have too many banks, we have seen that before. But there is room for banks whose strategy is very clear and who are coming to serve unmet needs; Maybe a few definitely, but not many because the industry is not finding it easy as people think.
“Most of the profits in the industry are at the top of it. All the other players are really striving and struggling. So if you want to put N25 billion down to get a license at this very point, you must be clear about what you want to do with it. If you are not clear what you want to do with it, you will join those struggling banks.”