Coronation Merchant Bank Limited has taken the frontline of investment banking in Nigeria. With ranking industry awards, successful public offers and steady growth in profitability, Coronation Merchant Bank has within barely two years of operations etched its name as the emerging force in the Nigerian wholesale banking industry.
Coronation Merchant Bank scored a double with the listing of three mutual funds on the same day at the Nigerian Stock Exchange (NSE) and emergence as the “Merchant Bank of the Year” at the BusinessDay Annual Banking Awards held in Lagos. Coronation Asset Management, a subsidiary of Coronation Merchant Bank, recently listed three mutual funds on the NSE, opening new opportunities for retail and institutional investors to invest in pools of diverse securities.
The three listed funds were Coronation Money Market Fund; Coronation Fixed Income Fund and Coronation Balanced Fund. The listing followed the success of the company’s initial public offerings for the mutual funds. Within its first year of commencement of business, Coronation Asset Management successfully pooled 479 subscribers with N1.65 billion through the Coronation Money Market fund, Coronation Fixed Income had 39 subscribers and yielded N315.205 million while Coronation Balanced Fund with 64 subscribers achieved N198.615 million.
The Facts
In emerging as the winner in his award category, Coronation Merchant Bank outperformed other wholesale bankers in key performance indicators. A review of the criteria for the award category showed that Coronation Merchant Bank outstripped other nominees in terms of profit after tax, loan growth, return on average asset (ROAA) and return on average equity (ROAE). Coronation Merchant Bank Limited grew its pre-tax profit by 128 per cent to N5.3 billion in 2016 as the wholesale banker launched several bespoke product offerings to optimise its performance. The wholesale bank grew its profit before tax from N2.3 billion in 2015 to N5.3 billion in 2016 while net interest income rose by 86 per cent from N4.3 billion to N8 billion. The group also recorded a significant growth in its balance sheet in 2016 as total assets rose to N106.5 billion in 2016 as against N78.3 billion in 2015 while shareholder’s funds increased from N20.24 billion in 2015 to N25.9 billion. The wholesale banker also continued to maintain a disciplined and prudent approach in asset creation in line with its overall risk management framework as evidenced in growth in loan book of 817 per cent from N2.5 billion to N22.7 billion with zero non performing loans.
Since commencing operations in 2015, the merchant bank has transitioned from a pure play discount house to a well-diversified financial services powerhouse, offering investment and corporate banking, private banking and wealth management and global markets and treasury services to its select clients. The group also offers, through its subsidiaries, a number of other services including securities trading and brokerage, asset management and trustees services. The Coronation Merchant Bank Group includes three subsidiaries-Coronation Securities Limited, Coronation Asset Management Limited and Coronation Trustees Limited.
Corporate strategy
Group Managing Director, Coronation Merchant Bank Limited, Mr. Abubakar Jimoh said the bank is on course for to deliver better performance.
According to him, despite the harsh operating environment during the year, the bank has sustained its tradition of delivering exceptional performance across all financial indices through an intense focus on innovative product offerings, excellent service delivery as well as prudent cost control and risk management practices.
He attributed the performance of the bank to increased efficiency in the overall funding mix and significant growth in the bank’s balance sheet size adding that the recent performance was a valid testament to the resilience of the group’s operations and its adaptability to current market realities and challenges.
“The impressive results of the bank in our last two years of business operations demonstrate the effectiveness of our strategy as we continue to grow market share in key segments of the economy. At Coronation Merchant Bank, we have identified the segments of the market and the economic sectors we want to play in. We have also defined a robust risk management framework with strict risk acceptance criteria. We maintain a disciplined and prudent approach in all our exposures to both dollar and naira-based assets in line with the overall risk management framework of the Group. We employ world-class risk management capabilities that help to balance risk and return,” Jimoh said.
He assured that while the general economic conditions and the regulatory environment remain tight, the bank’s new business and lending strategies, embedded risk management culture and continuous cost savings will enable it to stand firm throughout this period.
“We remain on track to deliver on our 2017 financial projections,” Jimoh assured.
Receiving the BusinessDay award, Jimoh dedicated the award to clients who provided the bank the opportunity to showcase its expertise and to employees whose commitment made Coronation Merchant Bank’s exceptional services and innovation evident.
According to him, as a team of professionals with uncommon potentials, the bank is not only determined to become Africa’s premier investment bank, it is also its resolve to continuously create value for customers, investors and other stakeholder groups.
Publisher, BusinessDay Newspaper, Mr. Frank Aigbogun, underscored the importance of the award noting that the awards programme was conceived to recognise competition and innovation.
Aigbogun pointed out that the awards programme is renowned for its rigorous and transparent process in selecting outstanding financial institutions.
Ambitious targets
Against the background of the listing of the three mutual funds, Jimoh said Coronation Merchant Bank will not rest on its oars. According to him, the group plans to build up its mutual funds to more than N50 billion within the next nine months as it seeks to open up bespoke opportunities to retail investors.
He said the bank will bring its experience in asset management to bear on its mutual funds to make them attractive to investors, adding that while the initial listing value of the three mutual funds was about N2.2 billion, the company plans to grow the funds to N50 billion by the middle of the next year.
“Our target is to get these funds to like N50 billion by latest the middle of next year and to be able to do that, we need to ensure that there are activities on the funds. So, we started with the introduction of about N2.2 billion, that is about N48 billion to go; that means significant things have to happen to get to that volume since our target is to ensure that there is massive activity on the funds. We need to make it happen, it will happen,” Jimoh said.
He said the launch of the collective investment schemes and their listing on the stock market provide opportunity for retail investors to get better returns and take advantage of the pool of capital to take advantage of benefits that usually accrue to large high networth investors.
“It is an investment opportunity for retail investors. The fact that these are listed also means that there is also going to be liquidity and pricing is going to be transparent. Demand and supply will drive the price and the performance of the funds will also be in line with the best international practice. The fact that we can bring retail investors together to have the same kind of benefits like institutional investors means that you don’t have to be afraid to invest your small funds in the market because ordinarily if a retail person invests, you don’t get the benefits of mass investment,” Jimoh said.
According to him, the company also plans to combine its bespoke funds for retail investors with other exotic products such as electronic traded funds and real estate funds among others.
“Before the end of the first quarter of next year we will bring additional funds to the market. Because we are a part of a group –Coronation Merchant Bank, we are going to push and work hard to ensure that we operate with the highest level of probity to ensure that investors have confidence and then investment will definitely increase,” Jimoh said.
He pointed out that the group has a strong pedigree in financial management as Coronation Merchant Bank has more than 24 years experience in financial management.
“The history of Coronation Merchant Bank is that we have been in business since 1993. This is not a short-run kind of business, the company is in with long-term in mind, we have been doing it for a long time and we will continue to do it,” Jimoh said.
Coronation Merchant Bank started as Associated Discount House Limited (ADHL) in 1993, owned by a consortium of financial institutions. ADHL became a leading financial services institution, thriving through the different headwinds the Nigerian economy has experienced. In 2011, a new leadership emerged at ADHL and by 2015; it launched its new brand name-Coronation Merchant Bank.
Jimoh said the group’s collective investment schemes hold significant wealth-creating opportunities for Nigerians as these schemes provide small and medium scale investors opportunity to earn higher returns and minimise their risks.
“Collective investment scheme ensures that you are able to get similar benefit that an institutional investor will get. If you have N2 billion total fund for instance compared to someone who invest N10,000, you discover that you stand in a position of strength than when you are investing small amounts. For instance, the returns, on the average, in the money market fund in the last few years is about 16 to 17 per cent, if you are investing N10,000 to N20,000 as a small investor, you would be getting between two to three per cent. That’s how massive the increase in the rate can be. This should encourage other investors to come into the market and get the same kind of benefits. When you invest collectively, you will get benefits that individually you cannot get,” Jimoh said.
For Coronation Merchant Bank, investment banking is not only for the high networth individuals and institutions, but also a wealth-creating powerhouse for the low to medium-income groups, a socio-economic bridge for the common good of all.
