As Profit Levels Continue To Rise Under Dr Gilpin’s Leadership… The Rise And Rise Of RCB


By Arthur Caulker

Rokel Commercial Bank under the dynamic leadership of the banking guru, Dr. Walton Ekundayo Gilpin has amazingly been able in the immediate past years to transform itself from a loss making to a profitable financial service provider that is the envy of other competitors.

Reporting on the current health status of the bank, Dr. Gilpin said profit levels continue to rise and exceed estimates. As at December 2017; pretax profit stood at about Le60 billion (about US$8.5 million). This, Dr. Gilpin said, is about 625% higher than the estimated Le8 billion.

In 2028, RCB’s profit levels have risen upwards and exceeded management’s expectations. Already, the estimate of Le20 billion for the year was significantly exceeded at the end of March, 2018 at about Le23 billion. At the end of July, profit stood at about Le55 billion before tax.  At the end of 2018, the bank is confident that it will exceed pretax profit of Le100 billion because the necessary investments have been made.

This picture of upward mobility in profit at RCB is in sharp contrast with its position in the most recent past when it was saddled with difficulties due to massive positioning for bad debts, due to the bank’s inability at the time to diversify its investment portfolio.

This has been remedied by massively overcoming the hurdles and strengthening its asset quality through full provisioning and recapitalizing.

In that direction, at the end of 2017, RCB’s standby capital was far above the minimum 15% required by the Central Bank at 23% adequacy. This implies that the bank’s liquidity is full-bodied.

However, notwithstanding the RCB’s asset turnover and profit as against income ratios which are growing, the bank is taking advantage of its high liquidity position to generate alternate income.

One of these is the ‘Sim Korpor’ which is projected to have 15, 000 sign ups in Freetown within the next six weeks. It will generate additional income because it will charge a commission on transactions.

Dr. Gilpin said the service started in Freetown because, according to him, “you have to start somewhere,” noting further that if the bank’s spreads out the service rapidly, it would not be able to do it well.

Thus, he said, they want to start small, learn lessons and in the coming months extend the service.

From Freetown, they will target the South next within the next two months; then East and North then further into more rural areas. Once the bank increases the number of its merchants, agents-base, those will reach out to capture more customers. The immediate target is 15, 000 which Dr. Gilpin said is huge.

Rolling out the ‘Sim Korpor’ is a herculean task for the bank, as its staff compliment is very thin, so it has had to recruit temporary staff and interns.

In further diversifying its investments, RCB will be guided by the advice of the new Finance Minister for commercial banks to engage in more traditional banking business of attracting savings and making loans to the commercial sector.

Accordingly, RCB plans to expand its deposit base because about 61% of its operational income comes from government papers by looking at financial intermediation through advances, overseas investments, improving on its mobile banking app and inter-bank lending.

Another strategy Dr. Gilpin said RCB will adopt to increase income is to cut down expenditure by among other things reviewing its contracts and use of stationary. For example, RCB used to print its statements on matrix which is bulky. The bank has now migrated to laser printing which is less costly. The bank has also cut down on use of electricity, basic supplies, fuel and become more prudential in the use of cash and assets.

The fiscal aspect of its cost cutting, Dr. Gilpin explained, is reducing costs whilst the monetary is about interest rates, exchange rates and inflation. With the latter, the bank has very little control. The only thing it can do is compete on its base rate which cannot be skewed; as the more profit the bank makes, the higher the base rate which is what the bank uses to price its products. In this regard, RCB is the second most profitable bank in the country, so its base rate is high.

Another area for improvement, he said, RCB is looking at is its internal policies which are constantly being upgraded, as they guide its operations.

For example, management needs to ensure that the core business principles which guide it – risk management, operation policy, assets management – are sound in order to strengthen overall corporate strategy.

With regards the quality of the bank’s assets, its quality has improved; with provision made for writing off of bad debts that have been in default for over 18 months; with significant efforts made to reclaim. However, when the loan is not repayable, the bank is left with nothing but to write it off.

Dr. Gilpin explained that writing off a bad loan does not let the defaulter off the hook, as it still remains in the books but not as a non-performing toxic asset on the understanding that if provision is not made for it, it weighs down the sector.

Explaining the burden non-performing loans had placed on the bank, Dr Gilpin said it rose up to 70%, the highest in the world and places he has worked, with the average of such debts in Sub Saharan Africa being as low as 6%. In Ghana, it rose as high as 13%.

The situation, Dr. Gilpin said was very alarming. So it made sense when the Central Bank directed that they bad loans be written off after fulfilling provisions for them and to thereafter go after the defaulters. The monies that will be recovered he said will add to the bank’s capital stock, as the law makes provision for that.

The figure which was 70% in 2013 now stands at 25%. One thing that causes bad loans explained RCB’s Head of Finance and Treasury, Abassie Thomas, is the amount of interest over time, the principal amount loaned and the high interest rate in Sierra which is about 20%.

On the other side, which is the revenue side, RCB’S focus is divesting and reinvesting in foreign securities whose interests are paid in dollars. As the bank improves its treasury management, it looks for opportunities within the local economy wherein it can lend to other banks and make some overnight profits.

In the eventuality of government deciding to opt out of treasury bonds, the bank has a plan. It will give another target to its branches and go into the market to look for investments in-country and outside within stipulations set by the Central Bank.

However, because of its Local Liquid Assets Ratio (LLAR), the bank has to keep most of its liquid assets in the country. For operational and profitability efficiency, RCB has its own yardstick and benchmarks that enables effective quarterly monitoring of performance.

In increasing performance, output, productivity and profits, RCB has increased branch briefings and meetings. Staffs are now more aware of target lines and how to approach it in a bid to increase income.

Going forward, Dr. Gilpin said, RCB has a plan to work with the government in line with the New Direction to ensure that government’s private sector led growth investment plans are actualized.

Thus, RCB is looking at how to respond more dynamically to the banking needs of the people; as the bank is owned by the government which is the principal shareholder to which the bank pays dividend. Dr. Gilpin said it is part of their duty to increase the tax they pay to government as well as reach the un-banked in the country by aggressively introducing its mobile banking all into the rural areas, open accounts and capture as many new customers as possible.

However, the bank’s expansionary constraints include lack of economic diversification in the country. This means that the bank as at now can only invest so much. With a small economy, lack of business ideas, when you are faced with an inability to expand, Dr. Gilpin said, “you have to innovate.”

He noted that sometimes liquidity is high because investment opportunities are not available whilst the bank cannot sometimes meet the demand of big time lenders which calls for syndication (two or three banks pulling their resources to meet a customer’s demand).

Thus, overall, Dr. Gilpin said the entire banking sector has to work closely with the government to look at banking policy and industry regulations because at anytime there is an innovation in the sector; regulation has to guide that innovation – for example, introduction of mobile banking.

Dr Walton Ekundayo Gilpin is a seasoned, internationally recognized financial expert with over two decades experience managing complex policies and processes in banking and banking-related institutions in Africa, Europe, South Pacific, Caribbean, and the United States.

As a senior advisor to the Commonwealth Secretariat in the United Kingdom, he managed significant fiscal reforms and debt restructuring initiatives that formed the basis of effective and sustainable reform strategies in more than 25 countries.

In this capacity, he also helped strengthen the technical and management capacity of financial sector professionals by emphasizing approaches and skill sets that bode well for institutional transformation and enduring change.

His goal-oriented professional philosophy has been a hallmark of his career. During his tenure at the Bank of Sierra Leone, he provided technical input into complex interactions with international partners, such as the International Monetary Fund, African Development Bank and World Bank and was instrumental in banking and financial research analysis having worked in the Research and International Financial Departments.

At the Commonwealth Secretariat, he supported the Secretariat’s advisory services in debt and public finance management initiatives in Commonwealth member countries and lead technical initiatives in banking and financial issues in country Missions and International Conferences.

His capacity building skills were significantly useful in designing and implementing training modules in financial analysis for public sector officials in government and Central Banking related institutions.

In private practice, Walton has served as a consultant in public finance, risk and liquidity management, bank-sovereign interdependence, to name a few. He has worked on projects for reputable organisations such as the International Monetary Fund, World Bank, African Development Bank and the United Nations Development Program.

He has contributed to critical thinking and intellectual development in banking, finance and debt management through reports and publications, including:- An Insight into Public Debt Portfolio Benchmarks and Targets, Domestic Borrowing and Inflation and Exchange Rate Management in Sierra Leone.

His commitment to capacity building is to mentorship and professional development throughout his career. He holds graduate degrees and professional qualifications in economics, international relations, finance and debt management. He enjoys international affairs, reading and football.