Challenge of de-marketing in banking industry
Soludo
It is obvious that competition is about rivalry. But as a standard, healthy competition that is based on innovative ideas, rather attack on brand image, has always been advocated globally.
The 2005 banking consolidation in Nigeria under Prof. Charles Soludo-led Central Bank of Nigeria (CBN), had ended with a fierce competition among the 25 consolidated brands. For some, the struggle just began and it was about mega status and dominance, while for others, it was for greater share of the clientele, especially those that their banks were either acquired or merged.
In the quest for whichever, some scripts, both unethical and bereft of professionalism were played against each other. In the financial world, it is called de-marketing. It is a calculated attempt to smear a competing corporate brand either directly or indirectly. This could take the form of sponsorship of reports that are not wholly facts or interpretation of developments to suit ones target of portraying the brand in the bad light. The end of it all is to cause disaffection and dis-popularity, and by extension divert patronage to self or others.
At the height of the “cut throat” development in 2006, there was an exchange of words and accusations among Nigerian bank chiefs, reportedly even at a session of the Bankers Committee meeting. Of course, as real as the threat was, the regulator had to wade into the matter.
“When the banking industry had 89 banks, some of the weak institutions made efforts to demarket others by circulating false distress lists and negative information all in the name of competition. They were then warned at the Bankers Committee followed by CBN clarification to the public.
“With the emergence of 25 strong banks, post consolidation and the existing large terrain for all to professionally and profitably do normal banking business for the growth of the economy, such practice is not only unacceptable but condemnable.
“Information reaching the CBN indicates that the unethical and unprofessional practice of spreading false stories to de-market other banks has again started to emerge in the system. This shows that that the industry still harbours some operators/officers who still conduct themselves unprofessionally,” the then Director of Banking Supervision, Ignatius Imala, said in an April 2006 circular to all banks.
As a general warning to banks and their officials, the regulator had to put the responsibility on the 25 bank chiefs to address their respective constituencies on the matter, which was then attached with heavy penalty of outright dismissal and blacklisting for any culprit.
“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.
“All are advised to comply in the interest of the industry and the economy. We are also inviting the general public to report any staff of a bank or banks involved in such unethical conduct to the CBN,” the circular added.Barely three years after, in 2008, the issue came up again. The same Imala, who had sent the earlier warning, was forced to do the same again.
“The CBN has again noted with serious concern the recent practice whereby some officers of deposit money banks engage in the de-marketing of other banks through disparaging comments and the use of negative text messages.“This development, which constitutes a threat to the safety and soundness of the banking system, is unprofessional, unethical and unacceptable. Banks and their staff are by this circular reminded that the responsibility for ensuring the safety and soundness of the banking system is a collective one for all stakeholders.
“Banks are therefore advised to caution their staff on this practice as henceforth, any staff of a bank found to be involved in such an act will be summarily dismissed and blacklisted. “Also, if another staff of the same bank is involved in such a practice, the institution will face severe sanctions including, but not limited to a monetary fine of N10 million. Appropriate channel will be opened by the CBN for the report of such unwholesome practice by banks’ customers and the general public,” the October 2008 circular read.
Though six to eight years are long, but not enough for the next round of de-marketing to start. But this time, the implications were tending towards systemic. Of course, the collapse of a Systematically Important Bank and a rising Tier II bank, both having just acquired another bank, as a result of de-marketing, would be difficult not only for the industry, but the economy as a whole.
Due dereliction of duty and a matter of not letting things go off hand, CBN in July, relieved some board and management members of Skye Bank Plc of their duties. But shortly before the announcement, the social media had spread the rumours that the bank was distressed and taken over the bank. Panic withdrawal followed.
But CBN Governor, Godwin Emefiele, specifically said that “Skye Bank and in fact, no bank was distressed”. But before the announcement, the harm has been done and there are accusations of banking industry information leak.
Still, few weeks later, there was a renewed assault with text messages that the bank is distressed. The assault was so serious that the CBN had to specifically issue a circular, as well as advertorials in the dailies, to assure the public that Skye Bank was not distressed and was indeed health. Imagine the costs and what it will take redress falsehood.
The recent de-marketing assault however, was not limited to Skye Bank. Industry operators and some interested members of the public have however, been associated with the recent spread of damaging information against Heritage Bank.
One is that it is distressed, but according to the 2015 financial statement of Heritage Bank released in April, it recorded gross earnings of N24.2 billion and posted a profit after tax of N1.1 billion. The deposit base was N312 billion, while it gave N175 billion as loans during the year. CBN appointed the bank as partner in March this year for the pilot phase of a N3 billion Youth Entrepreneurship Development Programme. Just this July, a reputable regional trade institution- African Export-Import Bank offered Heritage Bank $150 million lifeline and no institution of that caliber would extend such facility to a dying bank.
From the political angle, the bank said it has been labeled as “Saraki bank” with respect to the embattled Senate President, Dr. Bukola Saraki. Yet, even at inception in 2013, Saraki’s family has less than 10 percent in Heritage Bank and with ownership dilution, especially since the acquisition of former Enterprise Bank Limited, the stake has pared due to additional capital from new investors.
The former chairman of Skye Bank, Tunde Ayeni, has also been rumored as a majority shareholder and that he borrowed so much money from the bank, as a result of which the CBN will soon ‘take over’ the bank as it did Skye Bank.
An industry source that pleaded anonymity said that $2.3 billion NNPC dollar saga with banks, also exposed the industry to ridicule by the way it was handled. The course said that while 15 banks were involved, only nine were exposed and that gave de-marketers boost to target those mentioned.
“The CBN itself has been helping the course of the de-marketers, especially the way it handled the issue of the NNPC funds in the care of the banks,” the source said.
A source from Heritage Bank said that the cause of the de-marketing assault on Heritage Bank is its success into the “Tier II” category of banks in the country. From entry into the industry in 2013, from the ashes of the defunct Societe Generale Bank (SGBN), defying pessimism about its viability and ability to compete in a fiercely competitive industry, it began verification exercise and payment of about N21 billion to depositors of the defunct SGBN. A feat considered impossible by most industry watchers.
Despite that, it made a daring bid for the former Enterprise Bank and made the payment for the acquisition in record time and now successfully integrated the two banks without any crisis or rancour.
“The sin of the bank included 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 source said.
From loss of jobs, leading to social issues; loss of revenue to government accruable from personal income tax and company income tax; to confidence crisis against the banking sector, the collapse of any bank is not good for the economy. Therefore, healthy competition, not de-marketing, is the way forward.
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