Michael Larbie is the Chief Executive Officer of Rand Merchant Bank Nigeria, a subsidiary of the South Africa based FirstRand Group. In this interview Labie speaks on the bank’s effort to distinguish itself in the intensely competitive Nigerian banking industry. He also spoke on the forthcoming general election and its impact on the economy.
By Babajide Komolafe
RAND Merchant Bank has been operating in Nigeria since 2013. What hve been the major milestones of the bank during this period?
Over the years, the bank has developed a core client base of solid local companies, Multi nationals and Financial Sponsors. Our targeted approach has enabled the bank to meaningfully support core clients through different economic cycles and strengthened relationships as a trusted and reliable partner. Although the recession generally slowed down banking activities, especially foreign exchange (FX) and trade related transactions, we were able to leverage the reach and financial strength of the broader FirstRand Group our parent and offshore strategic investors as alternative FX sources to the CBN, allowing us to adequately service our clients.
Emerging out of the economic downturn stronger than when we went in was a milestone. The growth of our balance sheet and profits in each year offered its own milestones. RMBN has been involved in a number of pioneering transactions along the way. The part funding of Azura Power, a green-fields IPP and advising the sellers on the sale of Ikeja City Mall to Hyprop Investments Limited and Attacq Limited are good examples.
RMB Nigeria acting as joint issuing house and bookrunner on the African Development Bank (AFDB)’s seven-year medium Naira term note is a notable capital markets intervention. In 2017, the FirstRand Group added RMBN Stockbrokers to its Nigeria presence. The long-term vision for FirstRand is to be an integrated financial services player in this market.
Apart from banking capabilities and relationships, we pride ourselves on being a good and leading “banking citizen”. The bank’s strong corporate governance and conservative approach to risk management and abiding by regulations and banking best practices has ensured a very measured approach to doing business.
The Nigerian banking industry is fiercely competitive and dominated by commercial banks, especially the five Tier 1 banks which control about 50 percent of total assets. What is the unique proposition that will distinguish RMB and enable it to favourably carve a nitche for itself?
Increased competition is a testament to the resilience of the Nigerian economy and to the potential for future economic growth. We embrace competition as we believe there is room for multiple players to fulfil the needs of the broader market and economy.
RMB is an innovative and solutions-driven bank. We believe in building long-term sustainable relationships with our clients by providing them with innovative ideas and solutions.
We are very proud of our diverse talent pool who do the hard thinking and deliver innovative financing and structuring solutions to our clients.
Our strength is our ability to bring local and international hard and Solutionist thinking to bear. We structure the most appropriate financing solutions to meet the needs of our clients, whether extending project finance, structured lending, forex inflow and forex trading, hedging solutions, advisory services, or a combination thereof.
We actually prefer to partner with other financial services players if it is to the benefit of our clients. To that end, we have local banks as clients to whom we have extended lines of credit. We also see them as partners with whom risks can be shared and deals jointly structured.
RMB have done a number of deals in Nigeria but mostly in financial services, Oil & Gas, ICT. What determines the sectors and the kind of deals the bank engages in?
Our client base cuts across all sectors of the Nigerian economy. Our deal and advisory footprint include FMCG, Manufacturing, Telecoms, Oil & Gas, Agro Processing, Services and Infrastructure. RMBN’s client base also reflects government’s drive to diversify the Nigerian economy from oil and gas. That said, although our primary focus remains the non-oil sector, we will look at bankable oil and gas transactions should the opportunity arise.
What are the kind of deals RMB will like to do but without the opportunities for such deals in Nigeria?
Whilst the Nigerian market has made significant progress in catching up with the international markets, there are quite a fair bit of products that are non-existent in the market currently such products include single stock options, tradeable bank loans, securities lending, bond indexes etc.
Having said that, as a corporate and investment bank which prides itself of being “solutionist” providers, we are constantly creating innovative products to add value and mitigate risks for our clients. For instance, during the FX crisis, it was important that we were able to convince investors of the different risk management solutions available to hedge their exchange rate downside when investing. Hence, we aggressively marketed the Non-Deliverable Forwards, “NDF” to our clients.
Whilst the NDFs do not solve the convertibility risk, it does mitigate devaluation risk. We take pride in the fact that we at RMB facilitated such transactions during the period. We are currently working on a number of interesting structuring products that will also support the participation of professional institutional investors (pension funds, insurance managers and asset managers) in the real sector credit funding (manufacturing, infrastructure, agriculture) through structured debt note issuance. We believe this would further deepen the debt capital markets, and as such are closely working with the respective market regulators and stakeholders to achieve this goal.
As a corporate and investment bank, we embrace the challenge of finding solutions for our clients that will not only yield value for the client but also meets our philosophy of being a market reformer.
There seems to be much apprehension about Nigeria’s macroeconomic performance vis-a-vis the forthcoming general elections, with some foreign investors exiting the nation’s debt instrument. Do you share the same apprehension?
Despite potential political standoffs, we believe there will be policy continuity. In our view, there has always been policy continuity in Nigeria because the things we require are basic needs such as good basic infrastructure, improved service delivery, better education, healthcare, transportation and power.
The issue is always one of prioritization and efficient execution. We therefore believe that despite the upcoming elections and whoever wins, they have no choice than to deliver on some of these basic needs. That said, from a business standpoint 2019 is likely to be a truncated year with real activity being muted during the election season and only picking up once the election outcome is known and clarity emerges on policy direction.