Phillips Oduoza, Chairman, Nova Merchant Bank

By Okey Onyenweaku

Since its emergence on the nation’s banking scene, Nova Merchant Bank has not ceased to achieve unusual feats. Indeed, it has almost often come as somewhat natural to it.
From inception in 2017 – and indeed this was at the most trying of times for financial institutions in Nigeria given the harsh macro-economic conditions in the country at that time – Nova Merchant Bank stepped out with unusual verve and boldness to powerfully compete for a share of the seemingly saturated market.
To put it in even starker relief, this was the year banks ‘suffered huge setbacks following the 2016 recession and that ultimately led to the creation of Polaris Bank and take over Skye Bank’s operations and assets.
Further underscoring the stormy times of its emergence and the fact of Nova Merchant Bank keeping its head well above the waters, is the financial crisis that lingered from between 2008 – 2012 and which prompted the resultant global recession that claimed about 465 banks in the United States alone. Of course, other parts of the world, including Nigeria, also had their fair share of failed banks at this time.
Nova was to pull a major surprise when it hit the bull’s eye with its first trading year result in which it achieved a profit of N510.6million in 2017 and further grew its numbers by 125 per cent to record an even higher profit of N1.15billion in 2018.
Adding to the list of its continuing strings of successes, the new bank added another feat recently when it recorded a 300 per cent subscription of its N10bn bond.
The Merchant Bank had sought to raise an N10billion bond aimed at putting the business on a stronger footing to achieve its short-term and long-term goals.
The technology-driven financial institution raised the fund in a 7-year Fixed Rate Subordinated Unsecured Bonds offer under its N50 billion debt issuance programme at a price range of 12 to 12.50 per cent. The offer opened on June 30 and closed on July 8, 2020.
“The oversubscription of this bond offer is yet another significant milestone in the history of the Bank and represents a vote of confidence by the investment community in the resilience of our business model. We will continue to march forward with confidence in the realisation of our strategic objectives.” An overly enthused Chairman, NOVA Merchant Bank, Mr Phillips Oduoza stated at the close of the process.
Given that the feat was achieved at a very trying time for the Nigerian economy and the world economy which has been ravaged by the Coronavirus pandemic and the crash in the price of crude oil, Oduoza explained that part of the selling point was that the bank was well-positioned to fulfil its promise of focusing on the provision of long-term funding which is critical to the economic development of the country.
Rated BBB by Agusto & Co. and A+ by Datapro, the bond which is issued under a SEC-approved N50billion Debt Issuance Program is callable in five years by the bank.
Besides, Oduoza’s explanation, it is on record that the bank has continued to impress its owners and subscribers given that it declared a profit after tax of N1.65 billion for the 2019 financial year ended December 31, representing an impressive 44% growth compared to the N1.15bn recorded at the end of the 2018 financial year.
Details contained within the results also revealed that the bank achieved strong growth across all financial measurement indicators as it recorded a remarkable 113 per cent growth in gross earnings from N2.76bn in 2018 to N5.87bn in 2019.
Similarly, its profit before tax closed at N1.5bn, representing a 56 per cent rise from N0.96bn the year before; even as total assets grew by 155 per cent from N25bn to N63.8bn in the year under consideration.
At the close of the 2019 business year, customer deposit stood at N40.5billion in 2019, compared to N6.4bn in 2018; representing a rise of 533 per cent; while shareholders fund increased by 11per cent to N19.5bn in 2019 compared to N17.6bn in 2018. Loans to customers closed in the 2019 financial year at N29.3bn up from N2.4bn in 2018 and representing a significant rise by 1121 per cent.
This is no mean performance by all standards given the corrosive effect of Covid-19 not only in Nigeria but all over the world.
Indeed, this impressive outcome is being recorded against the backdrop of the fact that there is an overwhelming consensus that the Nigerian economy is not only in a generally anaemic position, but that it is headed for recession. Already, the federal government has warned that the economy would slide by about -5.8 per cent in the quarters ahead.
Unfortunately, also, the economies of about all of the African countries are already in bad shape; revenues have dropped by about 35 per cent; high debt servicing has become pervasive and investors have taken a flight. This is even as equities market capitalization the world over have lost $17 trillion in 52 days; there is a collapse of investor confidence; sentiments are fragile; about $40billion have left emerging economies; remittances are drying up while tourism has lost about $200billion.
Added to these are the challenges of high non-performing loans, which is put presently at 6.6 per cent, and as such higher than the regulatory benchmark of 5 per cent; high rate of inflation at 12.3 per cent; high unemployment rate at 36 per cent; insecurity at its highest level since the ’70s; and the advertised high incidence of corruption, particularly in high places.
It is within this dismal turf that Nova Merchant, which came on board after former Central Bank Governor Sanusi Lamido Sanusi dismantled the universal banking policy of N25bn shareholders funds for every bank and re-categorized financial institutions in the system, has now proved to be a most viable financial sector proposition.
And despite the overall discomforting condition, it is evident that one of the banks that has consistently shown strength is Nova Merchant Bank whose management says, it “wants to do new things, new ideas, new thinking and assisting the clients in different business models”
Not deterred by the failure of about 46 Nigerian banks since 1994 – most of the merchant banks – the management of the young and fledgeling Nova Merchant Bank sees abundant opportunities in the environment where many see frustration and hardship.
Speaking to shareholders at a meeting recently, the bank’s Chairman, Mr Phillips Oduoza, revealed that the young bank reported a significant improvement in all the key financial indices compared to the previous year’s achievement, and gave credit to the successful execution of the 2019 strategic plan in line with the key pillars to position the bank as a market leader by 2025.
He said that the bank will continue to focus on digital banking, provision of long-term funding, and wholesale and investment banking while maintaining a lean operating philosophy.
“I am particularly delighted that the key ratios are trending in the right direction and that we are beginning to see the results of our distinct and impactful business model as exhibited in the strong figures across all key indices. A notable reference in this regard would be that we recorded 0% Non-Performing Loans in 2019,” said Oduoza
For Anya Duroha, the Managing Director of the bank, “going into 2020, we will continue with our resolve to be the best merchant bank in Nigeria even as we will leverage upon our track record of trust, to deliver on operational efficiency through digital innovation while proffering customer-centric solutions to our existing and new customers.”
NOVA Merchant Bank Limited is a licensed, investment-grade merchant bank in Nigeria. It offers an integrated suite of financial solutions covering Wholesale Banking, Investment Banking, Asset Management, Securities Trading, Wealth Management, Trade Services, Deposit-Taking, Lending Activities, Transaction Banking, Cash Management and Digital Banking.
Its currently strong performance notwithstanding, there are obvious challenges ahead given the weak economy in Nigeria and Africa.
During the last global recession in 2008, the banking system was the central victim and arguably suffered the most. But for the leading light at NOVA, these are not insurmountable:
“Banking is changing globally with the emergence of new entrants and the infusion of non-traditional business models leveraging advances in technology. We believe Nigeria should not be left behind. Therefore, NOVA is here to bring a new experience in the banking industry. That was why we selected the name, NOVA, which means new. We want to do new things.” Oduoza had said at the launch of the bank. His reports say that he is yet on track and we wait for the verdict of the future.