About two months ago, on a hot sunny day in midtown Nairobi, the Kenya Bankers Association (KBA) threw a party to see off the former Central Bank of Kenya governor, Njuguna Ndung’u.
It was an epic event that drew the who’s who in Kenya’s banking sector. But besides Prof Ndung’u, the chief executive of KBA, Habil Olaka, felt there was one other guest at the function whose ambitions, he said, had affected the lives of everybody at the party.
That guest was Equity Group Holdings Ltd (EGHL) — formerly Equity Bank Ltd — CEO James Mwangi. “It was one of those moments in your life where you see the attendees and remember how far you have come,” Dr Mwangi told Business Beat.
“Most of the CEOs of big banks are people I mentored in their early career days. They worked under me.” For the Equity Bank boss, fighting for a bigger share of the Kenyan market is now akin to a father scrambling for a small plate of food with his children.
Mwangi is credited with opening up the banking space by pioneering ideas that simplified things like opening bank accounts and getting access to loans when he took over at the then struggling Equity Building Society more than 15 years ago.
The lender is now seeking to grow its market presence into 10 more countries in Africa — it is currently in five — over the next 10 years. “I no longer look to Kenya for growth. My plan is to make Equity the biggest bank in Africa and give our shareholders big returns on their investments,” said Mwangi.
Expansion into 10 countries in Africa is a massive undertaking, but with competition for the local market seemingly pitting him against the people he mentored, Mwangi, whose bank is now perched as Kenya’s number one in terms of profit and customer numbers, is responding to a need to widen the battle for customers.
Some of the executives he mentored and has found himself competing against include Paul Njaga, the CEO of Chase Bank. Mwangi poached Mr Njaga from PricewaterhouseCoopers (PwC) in London and appointed him finance director at Equity where he worked for two years.
The PwC London office also lost Edwin Mucai, who worked under Mwangi at Equity before moving to CFC-Stanbic Bank where he is currently the managing director of its South Sudan subsidiary. And last year, the United Bank of Africa Kenya appointed Isaac Mwige — who once served as Mwangi’s director of corporate relations — its first Kenyan CEO.
“Every time I walk into a meeting at central bank, the faces are familiar,” laughs Mwangi, who acknowledges that the team he mentored has done a good job for the country’s banking sector. “But its not competition with them, or lack of it, that is driving our plan to venture more outside Kenya. Our plans are well thought out and are driven by market fundamentals,” he said.
Further, having realised that it needs a big pool of talent to draw from to feed the huge market it seeks to create, the bank is not only investing Sh20 billion into its mega expansion plans, but is also shifting the power balance in the job market. The banking career path once went like this: spend four years at university and then head to a bank for job experience, most likely as a teller sitting behind a heavy glass barrier to dispense money, and eventually get promoted within the institution, or cross over to another bank or career.
But Equity has started a vicious war for young talent and is hoping to price away bright Africans from other employees in a bid to stock its new banking halls with the continent’s brightest youth once the expansion is over.
Kenyans want from incoming CBK governor It has invested close to Sh1 billion in what it calls the Equity African Leaders Programme (EALP), through which it seeks to create thousands of bankers with experience who are ready to hit the ground running wherever they are posted. EALP is the largest corporate internship programme in Africa.
It selects the most academically gifted secondary school graduates across the country and develops them into leaders to transform society. The programme selects the top boy and top girl in the Kenya Certificate of Secondary Education (KCSE) examination from every district where Equity Bank has a branch. It enrolled 2,023 beneficiaries this year.
The expansion plan may sound ambitious, but industry experts say the bank has taken on mega projects and seen them through successfully before, and there is every indication that this time will not be any different.
“Equity Bank and its CEO Mwangi have done a lot for the banking sector. Their contribution is massive and there are trends you can specifically attribute to Equity’s entry into the banking field. I believe [the expansion] will be a huge success,” said Mr Olaka.
When Mwangi joined Equity in 1993, it was a struggling building society and had already been declared technically insolvent. It was making losses in excess of Sh5 million every year and was facing a cumulative loss of Sh33 million.
The staff had not been paid salaries and morale was low. Mwangi joined as the strategy and finance director. Back then, Equity had 27 employees, 27,000 customers, five branches and stood at number 66 out of 66 in financial sector rankings. The big banks were closing branches that were deemed non-performing, mostly in rural areas.
This inevitably meant they had to retrench workers, too. Mwangi saw the gap, but Equity Building Society was too broke to fill in where the big banks had exited. Unable to expand immediately, he sought to do the bit that did not require capital — change the internal culture at Equity. He decided to focus on customer care. Customers, many of them peasant farmers, were given red-carpet treatment.
Tales began to spread about how farmers would come straight from their farms with muddied gumboots and be welcomed straight into banking halls. Mwangi’s past tactics have left other banks playing catch up, but the new plan, premised on an idea called Equity 3.0 Strategy, may see the lender’s rivals fall even further back.
Besides creating a huge pool of ‘A’ students from where Equity can pick its future workers, the strategy also seeks to place the bank on the path of continental expansion for its banking, technology and related businesses. The group also aspires to increase its customer base from the current 10 million to 100 million in the next 10 years.
Equity already took the crown for largest bank by profits this year, posting Sh17.15 billion in profit for the year ended December 2014. The result was 27.8 per cent higher than the Sh13.42 billion it made a year earlier. The second-best performing bank, KCB, returned Sh16.8 billion in net profit over the same period.
Share this story: KCB has also benefitted from Mwangi’s tutelage. Some of its top talents, including Chief Business Officer/KCB Kenya MD Samuel Makome, and former Chief Financial Officer Collins Otiwu worked under Mwangi at Equity.
KCB and Equity are among Kenya’s fastest-growing banks, blazing the trail in regional expansion, which they are betting on to reduce their reliance on the Kenyan market. Co-operative Bank, another indigenous bank, recently joined the East African expansion spree with a branch in South Sudan. According to Mwangi, the recently restructured EGHL will prioritise its entry to geographically proximate, high impact, under-banked markets with environments in which Equity’s operating model can be successfully deployed.
Such countries, he said, include Ethiopia, the Democratic Republic of Congo, Ghana and Nigeria. Other countries in the group’s radar include Malawi, Burundi, Mozambique, Zambia and Zimbabwe. “The planned growth across Africa by 2024 is an integral component of the Equity 3.0 Strategy.
To achieve this, Equity will select countries for entry based on the size of their banking markets and the applicability of Equity’s model in the respective markets,” said Mwangi. “Building on our distinctive strengths that have led to our success to date, Equity will follow a tailored entry and growth strategy for each country that is anchored on core group capabilities.”
In what he described as a cautious expansion strategy, Mwangi assured the bank’s shareholders during an annual general meeting held about a fortnight ago that the group would build on the proven results of its most successful delivery channels.
These, he said, include “community” branches, and agent, mobile and merchant networks, with the mix being varied to suit respective local market contexts. “My outlook is of an industry that’s going to be quite profitable,” Mwangi said. “We have what it takes to make this work.”