He took up the new job with much gusto, having worked for nearly two decades with Standard Chartered Bank both in Kenya and overseas in the United Kingdom and South Africa.
Munir Sheikh Ahmed looks back at his two-and-a-half-year tenure as chief executive of National Bank of Kenya with a tinge of regret.
He took up the new job with much gusto, having worked for nearly two decades with Standard Chartered Bank both in Kenya and overseas in the United Kingdom and South Africa.
“State-owned enterprises seem to be an environment that punishes performance so when I start doing a bit of soul searching, I feel betrayed,” said Mr Ahmed who was sacked from the lender on April 13, 2016.
“Someone told me the only way to thrive in anything that has something to do with the public sector is not to do anything. Don’t create waves,” he said in an interview with the Business Daily.
Mr Ahmed, who is currently under police investigation, spelled out his achievements at NBK as having helped the bank in product diversification, cutting expenses to improve the cost income ratio, balance sheet growth and use of technology to improve operations.
Upon occupying NBK’s corner office in August 2012, he focused on three issues to turnaround the mid-tier bank: centralising the operating model, automating processes, and leveraging on technology.
For example, Mr Ahmed said, NBK previously had 200 staff across the branches and 30 at the headquarters working on credit.
He restructured this to a credit processing team of 40 people based at the head office and re-assigned the credit officers to other positions within the bank.
“NBK did not have a single business unit,” he said, adding that 72 per cent of the loan book was made up of personal unsecured lending.
To diversify products and cut over-reliance on traditional retail banking, Mr Ahmed introduced new business segments including retail, business, Islamic (sharia-compliant banking), corporate and institutional banking, treasury, bancassurance, investor services, micro-finance and Chinese business.
A native of Mandera County and an old boy of Alliance High School, Mr Ahmed said he took over a bank that was technically on life support.
“I inherited an organisation that was in the tragic, obsolete and on its deathbed,” he said. He said NBK did not have any policies, and that he set out with his team to develop all the credit policies, market strategy, financial control policy, technology policy and balance sheet management.
Mr Ahmed graduated in 1990 with a Bachelor’s degree in Commerce (marketing) from the University of Nairobi and later did his MBA at his alma mater.
He started his working career as an auditor with PricewaterhouseCoopers in 1990 and later moved to Esso Oil. He plunged into the world of banking in 1996 when he moved to StanChart.
He laid out his strategy at NBK as follows: “Put in the right structure, reduce the headcount, outsource non-core activities, reduce the cost, and increase revenue generating opportunities.”
Mr Ahmed said immediately he began rolling out his strategy, he began hitting walls and facing resistance from those who didn’t want change.
“You have to step on people’s toes to transform an organisation,” he said.
He pointed out to a pay-for-performance model he introduced where employees had to undergo performance tests and those who could not deliver were kicked out.
“That’s the beginning of the story. That’s when you start getting calls from very powerful people,” said Mr Ahmed.
Taking charge of procurement and locking out ‘‘tenderpreneurs’’ saw these forces fight back, said Mr Ahmed.
“You can’t bring cost income ratio down without taking out a large number of vendors that were doing crazy things,” he said.
For example, NBK incurred between Sh45 million to Sh60 million to develop one branch, but the last branches he set up cost between Sh25 million and Sh30 million.
The former CEO engaged McKinsey to help in what he called the Transformation Programme.
As a result, a total of 200 workers were retrenched in 2013 at a cost of Sh1.1 billion.
He also set out to rebrand the bank to appeal to young and savvy customers, and drop the image of an old-fashioned bank with “dingy branches.”
On a warm Friday evening in May 2013, NBK rebranded and changed its logo and colours from the predominantly green to yellow, and a new brand promise.
Mr Ahmed’s pastime activities includes reading and walking. But he had run-ins with the media often accusing them misreporting on the bank. He says he reads at least three books every month on topics such as economics, history, technology and travel.
Mr Ahmed says a fair assessment of his tenure at NBK needs to look at what he had achieved in the 31-month period rather than the loss and non-performing loans at the bank.
“So we’ve now got 90 branches, 30 branches more than before, with 200 people less,” he says.
He also adds that the bank’s loan book more than doubled to Sh66 billion as at December 2014 from Sh28 billion in 2012.
The bank had the worst cost-income ratio in the banking industry of 78 per cent, said Mr Ahmed.
“It means every one shilling of revenue we generate, 78 cents go into paying salaries and rentals and all the costs that we run.”
But what pains Mr Ahmed most was the Treasury’s refusal to take part in a rights issue approved by shareholders in June 2013 that was expected to raise about Sh10 billion to finance expansion and growth.
“The NSSF even went ahead to write to CMA (the Capital Markets Authority) saying they’ll take up any untaken shares. But CMA said you need backing of two biggest shareholders which was not even a regulatory requirement, this was a CMA imposed condition,” he says. The delay saw NBK’s capital ratios thin out in the first half of 2014, and couldn’t loan out any more. “You cannot write a loan, or raise deposit without this.”
On the evening of March 29, 2016, NBK’s board of directors directed Mr Ahmed and five other manages to “immediately proceed on leave but will be expected to comply and make key submissions to the internal audit process.”
NBK later made a surprise net loss of Sh1.15 billion for the period to December 2015, blamed on mounting toxic loans. “I don’t decide any credit decision, they’re all decided by a board credit committee,” he says.
A fortnight after releasing the results, and half way through his tenure, Mr Ahmed received marching orders.
“I have regrets in not listening to people saying: you know this (NBK) is a government-owned entity, why would you join this place?”
His parting shot: “A lot of blood and sweat went into that. And a lot of hard work. All that is being degenerated.”
