Lendtech

Stanbic IBTC Didn’t Remit Fees without NOTAP’s Approval – Atedo Peterside, Chairman Stanbic IBTC Holdings Plc

Why does Standard Bank arrange an international investors’ conference in Nigeria every year?

As the financial institution with the largest interface with both domestic and international portfolio investors across both the equity and fixed income markets in Nigeria, we believed some years ago that it was fitting that we create a platform that facilitates continuous interactions that will aid development in the understanding of our markets and the economy as a whole. We believe any investor should have the most accurate information available before making decisions to commit capital in any market. The idea is that a conference like this should bring together many stakeholders in the development of the Nigerian economy and our securities markets to facilitate that process.

Why did you choose to host the conference in September, 2015, which is so early in the new Government’s life?

Traditionally, we hold this conference in the first quarter of the calendar year, bearing in mind the desire of investors to take a view on where to commit capital during the year as well as the timing of other related international conferences on Emerging and Frontier markets. However, this year was somewhat unique in that it was an election year and we felt it was important to allow the major elements/uncertainties of the political process to pass before inviting investors to Nigeria.  We think that a conference held at the start of the administration allows for the participants to gauge the tone that the incoming government would like to set, which should help them plan in the short to medium term.

What take home value should the investors who participate expect from this conference?

Investors should expect to take home a first-hand impression of the current economic climate in Nigeria and this should help them to determine more effectively how they allocate their capital between Nigeria and the other markets that they are considering as potential investment destinations.

 There has been some news about a suit instituted against Stanbic IBTC by a minority shareholder in relation to the payment of Franchise, Management, IT and other fees to Standard Bank of South Africa?

Yes, there is an ongoing suit and it was not filed today or yesterday. Some people decided to start publicising it now perhaps because they were incentivised to do so. It pertains to certain agreements between Stanbic IBTC and Standard Bank of South Africa and the fees that the former is contracted towards paying to the latter. This suit was brought by two minority shareholders. However, as the matter is sub judice, we are not at liberty to discuss the details of the case. The Bank has entered appearance in the suit and is defending same. I cannot discuss the case, but I can discuss the general principles as it pertains to dealings between the subsidiary of any multinational and its parent company.

Why is Stanbic IBTC paying Franchise/Management fees to Standard Bank when the latter is the majority shareholder of Stanbic IBTC?

 

Again, talking generally, there are various operating models, which international companies with a group head office adopt. Let us imagine that the head office has 1,000 staff who are there to service some of the common needs of the subsidiaries. This may cover  problem-solving, intellectual property rights, information technology etc. If each subsidiary needs a little bit of work in any of these areas, it will be inefficient and wasteful for each of them to go and employ experts on a full-time basis, especially when a single subsidiary might not be able to keep the expert busy the whole year round. If Nigeria only needs two hours of the man’s time every day for six months, then we do not want to employ him full-time. If Zambia, Kenya, Ghana and Namibia each need him for only one hour a day for similar services, it would not make sense for any single subsidiary to hire him. Instead that kind of expert should stay at the Head Office who should pay him and recover the cost of the pro-rata contribution that he made to each subsidiary either through a cost-apportionment exercise or through an in-built management and technical fee that covers such situations. This is akin to what economists refer to as economies of scale – each subsidiary spends less than they otherwise might have if they were all stand alone and totally independent outfits. The other direct benefit of this arrangement pertains to benefitting from group knowledge, shared experiences etc. There are also benefits and volume discounts available through bulk buying by the Head Office.

If Nigeria ( through NOTAP) says in August 2015 that certain arrangements are not allowed for Nigerian banking subsidiaries or any other specific sector that they ( NOTAP) now wish to disallow (on the back of a sharp drop in oil prices) and then notifies the Nigerian subsidiary that it’s outstanding applications seeking and awaiting NOTAP approval for certain payments for prior years will not be approved then all that the Nigerian subsidiary can do is to inform its parent and say :- “hey the authorities here have barred us from paying you.” It is the parent company that will decide whether it wants to appeal this ruling or suffer some financial loss that it may have to absorb from this adverse ruling. As the Chairman of the subsidiary I help to ensure that the board takes the appropriate decisions in line with regulatory directives and known accounting standards.

Does this controversy have any relevance to other foreign investors?

Yes, absolutely. The Principles being discussed are principles surrounding Intellectual Property Rights, International Business Operating Models, making your country an attractive business destination for FDI’s, Corporate Governance etc. The international investment community watches all such rulings very carefully. NNPC recently had to reverse the blanket ban that it placed on 113 foreign oil tankers/vessels. J.P. Morgan recently kicked Nigeria out of its emerging market bond index. Investors watch that too. They watch everything and every dispute and they decide if our regulatory authorities are fair and unbiased arbiters.

Take the issue of global or Pan-African adverts and/or sponsorship of international events that benefit several subsidiaries. Multinationals adopt two general approaches to spreading the costs and benefits of these activities. They either apportion them across the subsidiaries or they ask the subsidiaries to make a contributory payment that is built into the royalties, franchise fees or something similar. I do not understand how the Nigerian subsidiary can honestly share in the benefits while refusing to make any form of contributory payments towards the general pot that is used for sponsoring say the African Nation’s Cup or adverts on CNN which project and promote all the African subsidiaries. NOTAP is our authority on these matters and so they are the ones charged with the responsibility of understanding the variety of business models that exist globally on these matters in the 21st Century before deciding what should be applicable here.

In my humble opinion, rules governing adverts, sponsorships etc. should be generic. A global advert is a global advert and the sponsorship of a Pan-African event can be undertaken by companies in any sector (including banking) and so I personally do not understand how the underlying principles for cost apportionment vary between food and drinks versus banking. Surely what is good for the goose should also be good for the gander? We can apply the same logic to Information Technology projects which are for the benefit of several subsidiaries.

Are you, as Chairman, on the side of Standard Bank or on the side of the dissenting minority shareholder on this matter?

The hat I wear in this dispute is that of the Chairman of Stanbic IBTC Holdings PLC, and I am committed to acting in the best interest of the Company. I am for honesty and FairPlay having regard to international best practices. In addition, you must be mindful of the published fact that I am a significant shareholder in Stanbic IBTC Holdings PLC, and so why will I ever support an unjust action that will harm my own financial interests? Having said that, I am not one to disrespect any foreign shareholder and treat them unfairly just because that will increase what accrues to me as a shareholder of their Nigerian subsidiary.

So there is no truth in the allegation that Stanbic IBTC Holdings is engaging in unapproved and illegal transactions with its foreign technical partners?

Stanbic IBTC is a fully compliant and responsible corporate organization which operates in accordance with international best practices. Stanbic IBTC has not and will never make any international remittance without due approvals from the National Office for Technology Acquisition and Promotion (NOTAP).

Did you personally put pressure on NOTAP at any point to approve the remittances using your position as a member of the National Economic Management Team (NEMT) under the last administration?

No. I never approached NOTAP. The Management of Stanbic IBTC have been engaging with NOTAP on this matter. We believed this to be a routine business application which needed to be made to NOTAP.  If anybody in NOTAP ever saw me in their offices, they should describe the colour of the attire that I wore on that day.

What will happen to the accruals you made for this item since NOTAP have now finally written to your bank on their stance?

Appropriate action will be taken in line with the relevant accounting treatment when a liability is no longer payable. We did not invent accounting standards. We simply follow them.  If there is a post-balance sheet event then we know what to do.

Why is Stanbic IBTC not responding to the allegations in the media?

The matters relating to the specific allegations are under legal consideration. Therefore addressing them on the pages of the newspaper will be in contempt of the court. We did, however, put out an advertorial in national dailies on Wednesday September 2nd, in which we assured our stakeholders that we are a responsible company that respects and adheres to accounting standards. If you notice, even in this interview, I have not mentioned a specific item or a specific amount because all those specifics are for the court to decide. I only discussed a general principle as it applies to virtually all subsidiaries of multinationals applying in various sectors across the world.

Is the Financial Reporting Council of Nigeria (FRCN) really investigating Stanbic IBTC Holdings as reported?

Yes, they said they were acting on a petition by the protagonist in the law suit and we are cooperating with the FRCN and will address any concerns that they raise.

What happens if Stanbic IBTC is found culpable of the alleged offence?

Is applying to the legitimate body (NOTAP) for approval an offence? Where in the world is that an offence? Stanbic IBTC has adhered and will continue to adhere to the highest ethical standards in line with regulatory requirements and international best practices. We will cooperate fully with all regulatory agencies in the performance of their impartial duties, and comply with regulatory directives and court rulings. We also know our rights under Nigerian law.

Did Stanbic IBTC’s balance sheets in 2011, 2012, 2013, 2014 show true and fair positions of the state of the company?

Our Accounts were audited in line with International Financial Reporting Standards and accounting policies. I have said repeatedly that we conform with all known accounting standards. We have always also used some of the most reputable accounting firms.

Will the FRCN investigations affect Stanbic IBTC’s operations?

We are a full range financial services institution offering banking, wealth management and pension funds management services, amongst others. We continue to leverage on our brand equity and financial strength to provide excellent services to our customers. Stanbic IBTC Holdings PLC remains well capitalized and has sufficient liquidity.

Why was the Resolution relating to the General Mandate to be granted to Stanbic IBTC in relation to third party transactions presented at a recent EGM despite the fact that a dissenting shareholder sought to obtain an injunction from the Federal High Court to restrain the EGM from passing such a resolution?

Stanbic IBTC was seeking to comply with The Nigerian Stock Exchange (NSE) requirement that companies should seek Shareholders’ approval for related party transactions through a General Mandate. We could not have ignored an NSE directive to all quoted companies.  Despite the fact that the Court did not grant this injunction preventing the General Meeting from voting on this resolution, the Board through me, as Chairman, recommended and shareholders approved a resolution to step down the resolution that related to the grant of a General Mandate in respect of third party transactions because we were not comfortable persevering with an issue without hearing out its opponents properly.

Why did Stanbic IBTC propose a Rights Issue?

This was part of Stanbic IBTC’s long term capital plan to raise capital in order to drive future growth.

Why was Stanbic IBTC’s Rights Issue put on hold? And will proceed with the rights issue after the resolution?

The Securities and Exchange (SEC), as regulator of the capital market, has placed our proposed Rights Issue on hold pending further discussions and inquiries pertaining to this same matter that is in court. It had earlier approved this Issue. The management of Stanbic IBTC will continue to engage with the relevant regulatory bodies to ensure that all enquiries are addressed in a timely manner. Yes. This is in line with our long term capital raising plans.

Can you shed more light on the payment of a scrip dividend that also now appears to be in dispute?

At the EGM of Stanbic IBTC Holdings PLC (“the company”) held on 06 August 2015, shareholders overwhelmingly passed a resolution authorising directors to offer to all shareholders entitled to receive interim dividend the right to elect to receive new ordinary shares instead of the whole of any interim dividend declared by Directors in respect of the financial year ending 31 December 2015.

In line with the said approval/resolution, a number of shareholders elected to receive new ordinary shares instead of their cash interim dividend. On the other hand, those shareholders who elected to receive cash dividend have been paid their cash interim dividend since 28 August 2015.

It is therefore surprising that certain shareholders, having elected and received their cash dividend are now seeking to prevent those shareholders who elected to receive new ordinary shares instead of their cash dividend from doing so. This is totally unjustifiable and should not be allowed by the regulators; as it would be unfair to those shareholders.

Is Stanbic IBTC adequately capitalized? Does this not raise questions about your level of liquidity?

Stanbic IBTC remains well capitalized and has sufficient liquidity today and in the immediate future. The rights issue was about supporting our growth plans.