Banks’ Strategic Market Positioning: Turning Post-Recapitalization Challenges into Sustainable Benefits

By Ken George Iheme

As the deadline for banks to meet new recapitalisation thresholds draws closer, the race is no longer just about raising capital. The real challenge is how to put that bigger capital base to work in a way that secures growth, profitability, and long-term stability. For proactive banks, this is a chance to reposition in the market, attract more customers, and convert recapitalisation from a compliance hurdle into a strategic advantage.

A stronger capital base offers opportunities—broader risk appetite, bigger transaction tickets, and an ability to effectively support large corporate customers. But capital alone does not guarantee profitability. The banks that will thrive are those that creatively package products to resonate with both existing and prospective customers—corporate, commercial, and retail.

One innovative approach is the introduction of a Value-Chain Unbundling and Onboarding Product. This product is designed to help banks unlock and integrate to the bank, full ecosystem of their corporate and commercial customers— by ingeniously extending banking relationships beyond the “stem” clients to their layered value chains.

A Self-driven, SEAMLESS Operational Model for Customer Unbundling and Onboarding

Unlike traditional methods where banks push aggressively to ‘unbundle and onboard’ value-chain customers, this product flips the model. It motivates the main corporate and commercial customers to drive the process themselves, urging their suppliers, distributors, service providers, and even staff to open accounts and transact with the bank. An embedded BAIT-LIKE reward mechanism, irresistibly attractive, gravitates banks ‘stem customers’ to desiring the product.

The structure works vertically (downstream suppliers, raw material providers), upstream (off-takers and distributors, etc), and laterally (support service providers and staff of various value-chain layers). This “self-driven” mechanism creates a natural pull-effect whereby value-chain partners, in concert with the bank’s ‘stem customers’ access embedded varietal benefits but typical to their respective peculiarities, while the bank supports and complements the process.

The multiplier potentials of the product is realistically awesome. For instance, if just one corporate customer has six major value-chain layers, each with three possible banking relationships, that alone generates at least 18 new accounts for the bank—without the bank needing to do the heavy lifting. These new accounts would thereafter be anchored and serviced by branches conveniently nearest to the value-chain businesses.

In order to ensure optimal beneficial relationship to the bank, headoffice officers managing the ‘stem customers’ are expected to maintain periodic oversight duties on the value-chains through the branch managers or branch relationship managers; monitoring/evaluating the performances of the respective ‘strategic’ value-chains anchored by the various bank branches. Unless the chain of ‘distribution’ has gotten to the final individual or household consumers, the now anchored branch relationships (still being intermediate distribution channels) would be further primed to onboard their respective inherent value-chains.

It is obviously imperative to emphasize that to obtain maximal success from the product, systematic, dynamic-drive and coordinated efforts evidenced in fluid communication channels be set up between the stem account officers/managers (primary managers of the corporate and commercial accounts resident at Headoffice) and respective value-chain anchoring bank branches and maintained at top-notch functionality level. Undoubtedly, basic training in relationship management cannot be downplayed!

The Benefits

The potential benefits of this strategy are significant:

■Expanded customer base: Corporate and commercial banking customers persuade their value-chain partners to join the bank, making onboarding faster and more seamless.

■Liquidity retention: Funds that could have gone to other banks are instead captured and retained, thereby reducing outward turnover rate but further expanding the bank’s deposit base.

■Cheap deposits: CASA (Current and Savings Account) deposits grow substantially, providing the bank with stable, regular, predictable low-cost funding, as well as customers to whom risk assets could be extended to.

■Loan stickiness: When loans are granted to both the STEM and value-chain customers, the drawings remain within the banking system, boosting liquidity and helping enormously in repayment of availed loans, hence, avoiding probable loan default/stickiness from obligor customers.

■Income growth: An increased customer base effectively managed could result to more opportunities for cross-sales of bank products and generation of equally increased fee-based income from availed quality assets.

■Massive Liquidity inflows: With just 10 corporate customers driving their value chains into the bank, potential liquidity from them alone could exceed N500 billion (conservative estimation).

■Periodic oversight functions of the stem account officers on the branches anchoring the value-chains ensures that optimal benefit in the relationship is obtained and sustained by the bank.

■ Oversight involvement by the stem account officers provides a hands-on training to the anchoring branch account officers, assuming the branch lacks required quality of staff to manage peculiar needs of the value-chain relationships.

■ Others!

Structured Implementation

To operationalize this product, banks should present it as a global package to their Management Credit Committee/Board Credit Committee (MCC/BCC) for one-off approval. From there, it can be tailored to fit different sectors —manufacturing, agriculture, oil and gas, FMCG, and more. Adaptive structuring ensures it meets sector-specific needs while remaining uniform in concept. A second MCC/BCC approval is to ascertain compliance with required tenets of credit vis-à-vis the customer’s distinct peculiarities.

Why It Matters Now

Recapitalisation is not just about bigger balance sheet. It is about converting that strength into market penetration and eventual leadership, including sustenance of achieved success thereafter. By focusing on value-chain unbuldling and onboarding, banks can build a sustainable base of active customers that will put the new capital to productive use and exponential growth. An induced PRODUCTIVITY vibrancy win-win for all involved; the bank, stem customers, value-chain relationships, the banking industry and Nigerian economy in general.

This canvassed PRODUCT and modus-operandi also demonstrates something vital in modern banking: cocktail sensitivity of banking needs to customers ecosystem, as against sensitivity only to individualistic, narrowing needs. By creating products that not only serve the bank but also empower customers to grow their ecosystems, such proactive banks would definitely stand out from the pack of competitors, presently and in the future. Unsurprisingly, institutional as well as corporate entities would be more attracted to such creatively innovative, customer-centric banks.

The Road Ahead

All categories of banks—Tier 1, Tier 2, and Tier 3—must act quickly. Those who embrace value-chain unbundling and onboarding product with germane relationship management skills that awe high, middle and low categorised customers will, on meeting recapitalisation requirements, position themselves more strategically to attract and deploy accumulated increased funds most effectively for robust solidity, continual growth and quality profitability.

The opportunity is clear: convert recapitalisation from a regulatory burden into a springboard for innovation, coordinated extendability of product/service to customers ecosystem, growth and sustainability of achieved laudable performance; all being a manifestation of the bank’s articulatory vision hoisted on unbridled, acumenic managerial proficiency.

In the end, recapitalisation is not an end in itself. It is a means to broaden, deepen relationships, and create the kind of resilient, robust banking system that Nigeria’s economy desirously need.

Ken George Iheme (k_iheme@yahoo.com) is a Management Consultant, Consummate Banker with diversified, avid interest in packaging of Bank Products, Socio-Economic Empowerment Programs, and Financial Inclusivity Schemes.