How Omoluabi Mortgage is treading growth path though refocused service offering
Challenging macro-economic environment in Nigeria has put many businesses, especially those in the financial services sector, in neutral gear. But through efficient management of resources, creative and innovative products and services offering, some of them have not only stayed profitable, but also launched themselves onto growth path. And that has been the story of Omoluabi Mortgage Bank, one of Nigeria’s first generation primary mortgage institutions, writes CHUKA UROKO, Property Editor:
Amid very difficult operating environment and poor understanding of its operation by a good number of potential depositors/customers, the mortgage industry in Nigeria has continued to hold its space. With their low capital base and short term deposits, many primary mortgage banks (PMBs) remain in business, make profits and, in many instances, record growth.
Omoluabi Mortgage Bank is one of such PMBs. This is a first generation primary mortgage institution set up initially in 1992 in Osun State. The bank which is today a thriving and going concern has had what could be termed a chequered history. It started operation in 1999 as Living Spring Savings and Loans.
This name was derived from the State of Osun which used to be known as Living Spring. In 2011, it was changed to Omoluabi Savings and Loans, and in 2014 when it was listed on the stock exchange and recapitalized to increase shareholders fund to N2.5 billion, it was licenced to operate as a state PMB and became known as Omoluabi Mortgage Bank Plc.
After its recapitalization up to 2015, Omoluabi was everything but a profitable organidsation. This was before the new management of the bank came in. The bank had about 69 percent of its portfolio as non-performing and about 50 percent of this was lost.
About 77 percent of the outstanding non-performing portfolio was due to six accounts which were all linked to public sector and related parties. In 2015 alone, the bank’s impairment stood at N354 million.
The bank’s financial performance and balance sheet were disappointing as total revenue for 2015 was N214 million and a loss after tax of N168 million; total customers’ deposit was N147 million and 86 percent of this was related to public sector. Shareholders’ fund was depleted from N2.50 billion to N2.37 billion.
This was, however, to be expected from a bank with a shaky regulatory stand. The Bank had no accreditation by the Federal Mortgage Bank of Nigeria (FMBN) and had outstanding regulatory liabilities and fines.
However, good management with creative and innovative ideas has changed these narratives such that the bank’s current portfolio size is N1.3 billion, having grown by over 110 percent compared to 2015. Its non-performing loan has dropped to 11 percent from 69 percent in 2015 and is even adjudged low compared to industry average of over 30 percent.
Looking at its current financial performance and balance sheet, it is seen easily that the total revenue increased to N305 million in 2016, representing about 207 percent growth, and then N518 million in 2017 which shows a further growth of 170 percent.
From a loss position of N168 million in 2015, the bank recorded profit before tax of N79 million in 2016 and then N187 million in 2017, thereby declaring dividend for the first time in its history in 2017. Total customers’ deposit has gone up to N1 billion and 53 percent from the depositors are from the private sector.
With the help of its various technology platforms, including ATM, Autopay, Collegepay, Interswitch etc, the bank has been able to process over 300,000 transactions since May 2016, while shareholders’ fund which had depleted to N2.37 billion has now grown to N2.61 billion.
With improved regulatory stand, the bank can now boast strong liquidity with capital adequacy of 92 percent and liquidity ratio of 169 percent. It has regularized all the needed operational accreditations and standings with Securities and Exchange Commission (SEC), Nigerian Stock Exchange (NSE) and the Federal Mortgage Bank of Nigeria (FMBN).
Because of this, the bank now has a rating of BB+ assigned by Agusto & Co. It also has guaranteed access to a minimum of N2 billion in refinancing fund because of the investment it has made in the Nigeria Mortgage Refinancing Company (NMRC), giving it a stable and long-term fund for more loan creation.
When positive development is taking place and growth is seen, it means right decisions are being made and focused actions are being taken. It also means new ideas are coming in and there are efforts at retooling, refocusing and repositioning. These, exactly, are happening at Omoluabi Mortgage and they have set the bank on growth path.
“I joined the bank in November 2015 and so I have been there for a couple of years. The bank was perceived as one set up to service civil servants or government employees, especially when it was savings and loans”, Ayodele Olowookere, the bank’s CEO, revealed to BusinessDay.
Continuing, he said, “with the recapitalization and bringing on board more shareholders, the bank needs to be transparent in its operations. It also needs to be efficient and deliver results in a sustainable way. So, that makes us look inward and see how to reposition it, change the brand, the people’s perception and move forward.
With resolve, the management led by Olowokere set out, first focusing on service offerings. They refocused mortgage business by restructuring risk assets and liabilities products as well as engaging partners along the mortgage industry value chain.
The bank aligned with local interests by creating products for local environment; grew service reach by re-tooling operations department and grew to three branches from just one location. Automated Teller Machines were deployed in all the three branches.
Significantly, there was a change in approach to risk assets creation and management, leading to the setting up of a dedicated recovery and collections desk; it engaged recovery agents with aggressive contact and collection steps. Regularization, re-capitalization and restructuring of accounts of selected customers were also undertaken.
Enterprise-wide risk management processes was improved to ensure improved asset quality coupled with capacity building at post-disbursement and monitoring stages.
Through innovation and technology, a new and more robust banking software which helped to improve the bank’s services to customers were deployed along with the setting up of data center to drive the bank’s information technology, internet banking and e-business functions.
E-banking platforms were deployed and integrated with Interswitch; ATM infrastructure were acquired and installed at all branches to provide more flexible services to customers and generate more income for the bank.
There was also strong focus on people that involved phases 1 & 2 of critical restructuring that has been concluded. People-centred remuneration and training, holistic capacity development are on-going and these are being done through collaboration with regulators, training institutes and other partners.
“We have restructured the way we do business, refocused the company and also brought in new capacity. It has been a tough journey, I must say, especially being a state licensed mortgage bank”, Olowokere admits, but refuses to agree with people who classify Osun as a rural environment.
“Oshogbo, the state capital, is not rural. By population, Osun is a four-million plus state. In 2015, the state had the second highest human capital development index after Lagos and this classification was done by the World Bank. The state has the second lowest poverty rate based on the National Bureau of Statistics (NBS) rating of 2012, 2013 and 2014. It has the lowest unemployment rate, also confirmed by NBS in 2013”, he explains.