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Q & A with MD of HFC Bank Robert Le Hunte

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Robert Le Hunte was appointed Managing Director of HFC bank in July 2015.

Robert Le Hunte is a graduate of Economics of the University of Western Ontario, Canada.

He holds an MBA from the University of Manchester, UK and an MSc. in Accounting from the University of West Indies.

Mr. Le Hunte served as General Manager of Special Projects of Republic Bank Limited as well as the Chief Executive Officer and Managing Director of Barbados National Bank.

He is a member of the Institute of Chartered Accountants of Trinidad and Tobago and serves as the President of the Barbados Bankers Association.

In this interview with Citi Business News, Robert Le Hunte talks about the bank’s performance for 2015, the challenges the bank as well as the banking industry faced in 2015 and his expectations for 2016.

Citi Business News: 2015 was a challenging year for most businesses and banks were no exception, what was the performance of HFC in 2015?

Robert Le Hunte: Well, you know we are just coming out of our AGM, and we have published our results and you will see in 2015, it was not such a great year for our shareholders. I think in 2015, we posted a loss of about 35 million cedis, so 2015, from a result perspective was not good but we had some good things also for us at HFC.

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Citi Business News: What were the good things?

Robert Le Hunte: Well, you know, 2015 allowed us to do a lot of clean up. 2015 for HFC was a year of introspection.

It was a year of putting a number of things that were not entirely right revised. It was also a year we celebrated our 25th anniversary in the financial service industry.

We also got on board, we became a subsidiary of republic bank so 2015 had some good things.

Financially though it was not a good year.

Citi Business News: I am looking at your financials for 2015, in 2014 you made as much as 68 million cedis. But for 2015, it was only 37 million cedis, what led to these losses?

Robert Le Hunte: Well a big part of that and if you look at the financials, you will see in 2015 financials we are talking about 85 million cedis in provisions that the bank had to take, additional provisions.

If you looked at last year, I mean those were massive increases in that particular line.

So in 2015, there was a critical analysis of our loan portfolio and there was also an enhancement in our computer operations.

Those two factors resulted in a number of loans, when you critically look at our security.

When you look at the number of loans we had in our non performing category, we had to increase that and If I remember correctly, figures somewhere in the vicinity about two hundred and twelve million cedis worth of loans was transferred.

And when you move loans into non-performing, you have what is called a ‘double one mill’, it has a double effect. One, you have to immediately freeze interest on those loans. So if I freeze interest, where as before, I was getting income, I’m now getting nothing. So think about two hundred worth of loans that I was bringing in twenty percent worth of income before a third of two hundred million is about sixty five- seventy million in interest income that we were getting on the top. So immediately that stops.

In addition when a loan goes into non-performing, you have to access the loan, via international accounting standards as to the security that you have, versus the exposure. And when you do that analysis you add what you call provisioning. So when that analysis was done on some of these loans, it was recognised that we had to increase our level of provisioning. So by virtue of those loans transferring, its stops these interests from the top. And it also increases the provisioning at the bottom; the net effect is what caused this to show that loss.

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Citi Business News:  How long have these loans been piling up?

Robert Le Hunte: Well, you know, I am about going forward. Admittedly, some of these loans when you look at them, there were in our system forward back in 2010, 2011.

These loans were there.

Because of the computer system that we have now upgraded, these loans were not in some cases identified and in some cases the levels of provisioning against those loans were not what we considered to be adequate, having now critically looked at them and as you know in 2015, the banking industry, the central bank also did a more critical analysis or forced the banks to also do a more critical analysis of their loan portfolio.

I must say when we got that report from Central Bank, which came after we did what we had to do in 2015, I think the report did not show much difference between what they were recommending that we did and what we did on our own.

So we are now fully complaint with all of central bank guidelines, international accounting guidelines and was all part of the cleaning up process.

So I am not about trying to pass blame.

Clearly in the past, some of our provisioning level was not as aggressive as we should have been and we have corrected that.

Citi Business News: From  your data what type of customers, companies, individuals and from what sectors were pushing the loans up?

Robert Le Hunte: Well when you look at our non performing portfolio, I think we have some of them in the corporate area, I think about 50%, I think we have some of it in the housing area, and some of it in what we call the retail domestic area. So it is widespread.

I think part of it I must say is relooking at what is considered to be a non performing loan.

So in the past, you had a system, where if you had a nonperforming loan or if you did not pay your mortgage for up to 2 years, we did not deem the loan to be a non performing one.

But under our new system, what we consider to be a little bit more prudent, we think 2 years if you haven’t paid your mortgage, or a year and a half, that is a non performing loan and therefore had no right to be in the category of performing.

So that reassessment and more critical analysis in our mortgage portfolio has also resulted in the increase in our non performing.

 Robert Le Hunte , MD of HFC bank

Robert Le Hunte , MD of HFC bank

Citi Business News: What new measures are you putting in place for 2016, so that we don’t see this recurring again?

Robert Le Hunte: We have looked at the portfolio in the past so I think you will not get that level going forward, so that is cleaning in the past.

Going forward, we have spent a lot of time this year in training of our staff.

We have covered a lot of that.

We think we spent a lot of time since June last year till now, over 100 of our front line credit staff have all been retrained in credit analysis, just to ensure that going forward we are making the necessary assessment of customers so we don’t have that problem.

I want to hasten to add though a number of loans that we are talking about were not loans that were given in our recent portfolio.

So a lot of the present staff that are there will not be ones that will be responsible for these loans that we are now providing for.

But as a measure, and as part of the whole improving of the training capacity in nature, and republic bank, we have enhanced the credit skills of our present team.

We have also as part of our focus, as you will now realise, with the high level of nonperforming loans that we now have to manage, we have put a brand new team, which will focus on recoveries.

We have brought the team together, centralised it, and almost tripled the number of staff.

We have put a senior manager to be in charge of it.

So recovery is now our strategic focus and that with the new computer system that we have, that gives much more earlier detection,  we are now focusing on it and we hope therefore to increase the recovery element.

Citi Business News: Last year, we saw the mandatory takeover of HFC by Republic Bank. During that period there were a lot of board room wrangling, but you were able to deal with them and 2016 looks great for the bank, how  damaging was that period to your operations?

Robert Le Hunte: I think by and large, things have happened a lot smoother than I thought to which I am glad and a lot of that is driven by the response of the staff.

The staff response has been overwhelming, I think there is a new spirit that is prevailing over HFC.

I think we have gone a long way in fixing a number of legacy issues in the staff. I think we are working on trying to create a new result oriented culture.

 The staff we have just finished a grading system.

Over 65% of our staff have seen their jobs regraded and gotten promotions and have received positive impact on their salaries.

We have done a lot of communications.

Part of the issue that we felt is that the staff didn’t feel that they knew what was going on.

Coming out of even the MTO process, a lot of staff in the bank complained that  they were hearing what was happening from outside and therefore, we have put in place a communications department, and we have moved towards communicating to the staff on a regular basis.

Even myself as the MD, I have started a quarterly video that I have actually sent out to the staff again giving the staff information.

So every step of the way, we have made a commitment to the staff to communicate with them.

Nothing is said at the bank without them knowing.

So that has gone a long way in enhancing the morale of the staff.

And this whole cultural revitalisation, we consider it key.

You know with republic Bank coming in you had a new culture and therefore it was important that people understood the difference in cultures and work towards creating a culture in HFC that was going to be a win-win.

Therefore we have worked along that path putting things in place. We are now measuring in staff, we have customer service, we have staff satisfaction indexes whereby we monitor staff engagements on a quarterly basis and we have set world class standards that we are trying to achieve.

So now we know where we are as it relates to staff engagements and we know where we want to be and I think those efforts where staff are feeling that they are part of the revitalisation at the bank, where they are feeling that they are part of the institution, where they are feeling now that their words are having an impact and are being listened to I think that has gone a long way in revitalising the institution.

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Citi Business News: In your short term projections the bank wants to be among the first tier banking group within 3 years, how do you think you can do that?

Robert Le Hunte: Well I just gave you one of the answers right there.

It’s all about the staff engagements. I mean we talk a lot about the staff being our greatest asset, but at HFC, we actually have staff engagement scores that we have set for ourselves.

A 70% acceptance or engagement level is a world class standard.

So one of the ways we are going to become a big bank or one of the top tier banks is by getting all of our staff more engaged and going out there and increasing our market share.

HFC is a good institution, it had a good reputation.

By and large, a lot of people still associate HFC with housing and mortgaging.  A lot of people don’t know that HFC had forty two branches in 8 of the regions.

So there are a lot of things that HFC was doing, but it was not known.

HFC, in spite of itself, only has a deposit share in the market of 2% and a lot of that is because of the whole issue of staff involvement. So we are changing that whole culture of the organisation to be more result oriented.

Within a short space of time, we expect to see our market share consistently improving.

We have introduced new dynamic products into the markets.

Citi Business News: How are the products doing?

Robert Le Hunte: Fantastic! We have opened close to 5,000 accounts since we opened those accounts and they are starting to reap benefits.

So we think with those new products, I am betting on the Ghanaian markets that once you have an opportunity and you are able to make the switch, you will make the switch.

So we expect those products will continue to bring benefits and a number of new innovative products to come.

So we expect to make this big jump in our profitability, by focusing on our staff, new dynamic products and our customers.

All the staff in HFC have gone through staff customer service excellence training, all of that we have done in seven months and by the end of this quarter, every single staff in HFC is a new reorientation to the customer.

Putting the customer first and that is not just about talking, it is about the action, it’s about what you do and the organisation.

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Citi Business News: Some people say in order to achieve the projections you are making …ie to be in the tier one group in three years, you need to probably buy another bank or merge with one, are you considering an acquisition?

Robert Le Hunte: Well I think this is something we understand, that those things are possibilities that are open. But I have always learned in this industry that when you are talking about acquisitions, you have to have an active buyer and an active seller.

I am open to buy but I also have to find people that are ready to sell.

Our strategy for growth is not just to focus on one pillar.

That is one pillar, and if it happens, we will take it, we will analyse it and we are open to it.

But we are committed to grow without that strategy and we have to then grow by other areas, and we use organic.

So one could say in our strategy, we have an external acquisition strategy but we have an organic growth strategy.

Citi Business News: Let’s look at 2016 and your expectations. You were not able to make any added profits or declare any dividends for this year. What are your projections for 2016 for the bank?

Robert Le Hunte: Well, I don’t want to get out with my projections at this point in time. What I can say is this year is a year of consolidation. You have an institution that has performed well in the past, and I want to acknowledge all the people that have worked well over the past 25 years to bring us to this point.

We are about fixing the plane, there are things that need to be fixed and therefore we think that with our focus this year on consolidation, on recoveries, on deposit growth and deposit mobilisation, I think if we do that, we will be able to increase our profitability this year to levels that you might be accustomed that we were doing in 2013.

Citi Business News: This year the cedi has been stable, we still have power crises but it is better than previously and we do have elections coming up. A lot of banks say because of the elections and the uncertainty around it, they may hold investment. Will it be a different story for your bank?

Robert Le Hunte: Well I mean I hear that but we are open for business. Where there are good opportunities, we are going to be out there to try and take advantage of them. We understand the instability that could happen and we are looking at the market.

Generally as I said, this year, we are focusing on recoveries which you would expect coming out of last year and getting this whole level of non-performing loans, that has to be our focus.

But we don’t have this statement of not lending because we are constantly in the business of looking for opportunities and playing our role in nationhood development.

So we are still going to be looking or be it in a reserved manner. I mean one of our focus this year and we promise is our increased focus on CSR, where we are going to be looking at working more with our communities and looking at doing a little bit more of that work.

We said before, we have introduced something in the bank, whereby each community where we operate must feel the presence of HFC bank and therefore we are going to be working with the communities to ensure that the communities are better as a result of HFC being there, so this year those are the things we are focusing on.

Robert Le Hunte, New MD, HFC Bank

Citi Business News: In 2016, the first quarter, you had some impressive gains. Posting over 9 million cedis in profit, how were you able to make this turnaround?

Robert Le Hunte: Yes I think we did do well. 9 million cedis is a step in the right direction.

I think a lot of the initiatives, this first quarter also met us in a state of fixing finalizing, grading system.

We also had a volunteer separation package for the bank. A lot of people left, we brought in some new staff.

So I think it was good that we could make 9 million cedis while still fixing the plane while in the air and restructuring.

So I say great, I am glad that we enter profitability but I am a person who will continue to press the staff for a lot more.

So 9 million in the first quarter, we expect that figure per quarter to go up, so this quarter we expect to see a little better result.


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