biina:

It seems you don't understand the fundamentals of banking. The major bulk of funds that banks play with is the depositors fund. A bank essentially takes deposit from A, promising returns of x%, and lends it to B, at y%, where x is less than y. The difference (y%-x%) is the banks profit. This is why depositors are listed as liabilities on the banks balance sheet, and borrowers are listed as assets. Depositors are like paid up shareholders, with their version of shares being more volatile depending on the length of commitment. The paid up capital is to limit the leverage of the banks so that they do not rely entirely on other peoples funds (hence being over exposed), and also gives them some in house liquidity to play with (like a buffer). Hence one can see paid up capital as the baseline depositor. Those adverts are paid for with mainly depositor funds.

One should not get lost in the theory of marketing, and lose grasp of the reality of the market. Like I said above, the bank deals with two set of people: depositors and borrowers. The CNN adverts will not draw depositors, as the branch network of the banks is too limited to attract such, the deposits are insured in Nigeria, and anyways the banks have enough funds at their disposal. So we come to the borrowers: who will borrow from a Nigerian bank on the account of a CNN advert? Only Nigerians. The banks are not yet in a position to compete effectively in the global market. Thus do not be surprised if those adverts have yielded no ROI.

One might wonder how a bank survives if it does not get businesses. The answer is that it not too difficult to run a bank on a ponzi/pyramid scheme. Aggressively seeking depositors  enables you to rob peter to pay paul, while waiting for john to fall victim. The aggressive pursuit of depositor by Nigerian banks, as opposed to pursuit of borrowers, is evidence of an underlying unprofitability. Add the lax supervision by the CBN, and you could have an insolvent bank declaring profit.

While one would expect sanity to prevail on the board of any establishment, it is unfortunately otherwise in Nigeria. The board of a bank, and in fact most major companies in Nigeria, are often the culprits of the felony committed against the interests of the shareholders and the company. It is not uncommon for the board to make decisions that would enrich the pockets of the directors in the short term at the expense of the long term health of the bank. The poor corporate governance in the financial sector is evident by the large amount of contracts awarded to entities owned by the directors, and the plethora of personal loans to executives, that are written off as bad debts due to non-payment. To worsen matters, when the bulk of shares of the bank is owned by an individual (directly or through proxies like his wife), the board degenerates to a corporate AFRC where said individual's word is law.

Any interest that might have been generated by the ad, and failed to be translated into a borrower is of no value to the business, and is even worse as you have likely generated business for your compettitor.

yicob:

I understand You Biina. But how many times were you denied of withdrawing your funds at the bank ? What the Heck if they can always give me ma moni when i need it !

You have lost it here YICOB!

strangleyo:

Please don't complain about that.

Banks are private enterprises and they can do what they want with their money. Don't blame the bank's advertising for Nigeria's woes.

yicob:

Brash,
The only sufferers in the mismanagement are the innocent shareholders who are expecting huge dividend at the year end. As a depositor, Let them do whatever with my money so far i can withdraw when i want, interest or no interest.

Hehe!

But personally i wont be happy investing without getting dividends especially when the risks and frivolities can be better managed!

binna:

It seems you don't understand the fundamentals of banking. The major bulk of funds that banks play with is the depositors fund. A bank essentially takes deposit from A, promising returns of x%, and lends it to B, at y%, where x is less than y. The difference (y%-x%) is the banks profit. This is why depositors are listed as liabilities on the banks balance sheet, and borrowers are listed as assets. Depositors are like paid up shareholders, with their version of shares being more volatile depending on the length of commitment. The paid up capital is to limit the leverage of the banks so that they do not rely entirely on other peoples funds (hence being over exposed), and also gives them some in house liquidity to play with (like a buffer). Hence one can see paid up capital as the baseline depositor. Those adverts are paid for with mainly depositor funds.

One should not get lost in the theory of marketing, and lose grasp of the reality of the market. Like I said above, the bank deals with two set of people: depositors and borrowers. The CNN adverts will not draw depositors, as the branch network of the banks is too limited to attract such, the deposits are insured in Nigeria, and anyways the banks have enough funds at their disposal. So we come to the borrowers: who will borrow from a Nigerian bank on the account of a CNN advert? Only Nigerians. The banks are not yet in a position to compete effectively in the global market. Thus do not be surprised if those adverts have yielded no ROI.

One might wonder how a bank survives if it does not get businesses. The answer is that it not too difficult to run a bank on a ponzi/pyramid scheme. Aggressively seeking depositors  enables you to rob peter to pay paul, while waiting for john to fall victim. The aggressive pursuit of depositor by Nigerian banks, as opposed to pursuit of borrowers, is evidence of an underlying unprofitability. Add the lax supervision by the CBN, and you could have an insolvent bank declaring profit.

While one would expect sanity to prevail on the board of any establishment, it is unfortunately otherwise in Nigeria. The board of a bank, and in fact most major companies in Nigeria, are often the culprits of the felony committed against the interests of the shareholders and the company. It is not uncommon for the board to make decisions that would enrich the pockets of the directors in the short term at the expense of the long term health of the bank. The poor corporate governance in the financial sector is evident by the large amount of contracts awarded to entities owned by the directors, and the plethora of personal loans to executives, that are written off as bad debts due to non-payment. To worsen matters, when the bulk of shares of the bank is owned by an individual (directly or through proxies like his wife), the board degenerates to a corporate AFRC where said individual's word is law.

Any interest that might have been generated by the ad, and failed to be translated into a borrower is of no value to the business, and is even worse as you have likely generated business for your compettitor.

biina:

It seems you don't understand the fundamentals of banking. The major bulk of funds that banks play with is the depositors fund. A bank essentially takes deposit from A, promising returns of x%, and lends it to B, at y%, where x is less than y. The difference (y%-x%) is the banks profit. This is why depositors are listed as liabilities on the banks balance sheet, and borrowers are listed as assets. Depositors are like paid up shareholders, with their version of shares being more volatile depending on the length of commitment. The paid up capital is to limit the leverage of the banks so that they do not rely entirely on other peoples funds (hence being over exposed), and also gives them some in house liquidity to play with (like a buffer). Hence one can see paid up capital as the baseline depositor. Those adverts are paid for with mainly depositor funds.

One should not get lost in the theory of marketing, and lose grasp of the reality of the market. Like I said above, the bank deals with two set of people: depositors and borrowers. The CNN adverts will not draw depositors, as the branch network of the banks is too limited to attract such, the deposits are insured in Nigeria, and anyways the banks have enough funds at their disposal. So we come to the borrowers: who will borrow from a Nigerian bank on the account of a CNN advert? Only Nigerians. The banks are not yet in a position to compete effectively in the global market. Thus do not be surprised if those adverts have yielded no ROI.

One might wonder how a bank survives if it does not get businesses. The answer is that it not too difficult to run a bank on a ponzi/pyramid scheme. Aggressively seeking depositors enables you to rob peter to pay paul, while waiting for john to fall victim. The aggressive pursuit of depositor by Nigerian banks, as opposed to pursuit of borrowers, is evidence of an underlying unprofitability. Add the lax supervision by the CBN, and you could have an insolvent bank declaring profit.

While one would expect sanity to prevail on the board of any establishment, it is unfortunately otherwise in Nigeria. The board of a bank, and in fact most major companies in Nigeria, are often the culprits of the felony committed against the interests of the shareholders and the company. It is not uncommon for the board to make decisions that would enrich the pockets of the directors in the short term at the expense of the long term health of the bank. The poor corporate governance in the financial sector is evident by the large amount of contracts awarded to entities owned by the directors, and the plethora of personal loans to executives, that are written off as bad debts due to non-payment. To worsen matters, when the bulk of shares of the bank is owned by an individual (directly or through proxies like his wife), the board degenerates to a corporate AFRC where said individual's word is law.

Any interest that might have been generated by the ad, and failed to be translated into a borrower is of no value to the business, and is even worse as you have likely generated business for your compettitor.

nolongTing:

Thats a good analysis, its pretty much impossible to compete with banks in the west they manage Trillions; however seeing those ads in the UK made me proud and very likely to open an account with them. So, I guess that the primary target of their ads are Nigerians in the diaspora.

Sam Milla:

I believe that discussing it here is a nice start. We must not expect to make things right instantly especially since they have been doing this for long.

biina:

Not entirely true, as those funds include money from depositors, a group they have a responsibility to.

A-town:

All the banks have done is to advertise on DSTV or what have you. Cable/satellite operators sell "ad/commercial" space.
Their audience is africa. What better way than to advertise on DSTV. If they show the commercials in America, then only can you make so much noise about this.

AjanleKoko:

Hmmm. In theory yes, your analysis is spot-on. But there are a couple of things that make this case interesting.

1. Nigerian companies don't measure marketing ROI per se. It's more of an elementary budgeting exercise, i.e. if I have a projected turnover of say, 150bn naira, I need  a marketing budget of N5bn to achieve it. that would be something around $30m in the current forex situation. If I decide that I will spend say $1m of that budget on foreign media exposure, at the end of the day it wouldn't matter, if I can achieve the target turnover and profit. The marketing guys are free to allocate that spend as they like, so they can get away with it.

2. Have you ever thought about how it all started? IMO the exposure seems to be working for them, at least it did before the global meltdown, and it probably still is. Post-consolidation, the banks went on a mega-drive for funds deposit, and they seemed to be largely successful. It was one serial IPO after another, and you had banks declaring capitalization in the trillions. The perceived returns from the stock market got the attention of foreign banks who shocking scrambled over each other to join the party. Not Nigerians in the diaspora, foreign financial institutions. Some of these guys were even doing tenured deposits, what we call 'fixing' in Nigeria, cos of the attractive rates Nigerian banks were offering. At a point Morgan Stanley rated the Nigerian economy the best in ROI, to the shock of most of us. See what's happening today, the Fitch AA- ratings have been revised downwards to BB-, and our market went from being rated best performing to worst performing.

In my opinion, the whole thing is just about the hype called Nigerian banking, which has even been fuelled by some of these global institutions in recent times. There is just something about the financial industry and greed, they seem to work hand-in-hand.

tosh_acer:

the same stupid, unreasonable and meaningless people contributing on a very un necessary and uncalled for posting, what on earth is your own about where they chose to advertise. This is the problem of the black man, preferring to bury his head to the tiny corner of the world where he belongs and when things passes him globally, he starts complaining it is because of his colour.

How many of you have sought loans from these banks and have been denied? What is your problem with the way they spend their money? Nigerians don't cease to amaze me.

Nigerians in the diaspora, so antagonistic, so dull in thinking.

tosh_acer:

You mus think about postings here too seriously. So you think a bank will stop what they do because of what is discussed merely on a forum? How do you think?

tosh_acer:

With these kind of people representing the way an average Nigeria thinks, I dont see a future for Nigeria, bleak and sad, that is what i see here. Othe countries advertise on CNN, SKy etc, Malaysia is always on SKY, Qatar is always on SKY, but when anything Nigeria comes internationally, the same people who says nothing works in Nigeria stand up to nail it down as meaningless, what kind of people are these?

strangleyo:

If the depositors are unhappy with the way the banks are operating, they should take their money elsewhere.

yicob:

I don't just get it, does it mean other industrial sectors advertising on CNN stole money from somewhere ? All what we are saying about this bank are mere conjectures. Stallion Motors spend over N2 Billion yearly to advertise in Nigeria. How many Nigerians can afford chasis ? They dont target much of individuals but corporate bodies. Same thing with banks. They know their target.

A-town:

All the banks have done is to advertise on DSTV or what have you. Cable/satellite operators sell "ad/commercial" space.
Their audience is africa. What better way than to advertise on DSTV. If they show the commercials in America, then only can you make so much noise about this.

biina:

Also the average depositor is less informed and often does not see the hand writings on the wall until the palace is torn down. How many depositors review the annual report of their banks?

biina:

That is a valid argument in a free market environment, hence not applicable as the Nigerian banking sector is regulated, with depositors having limited choices.
Also the average depositor is less informed and often does not see the hand writings on the wall until the palace is torn down. How many depositors review the annual report of their banks?

strangleyo:

How many depositors of CityBank, RBC, Bank of Montreal, Barclays Bank, HSBC and Northern Rock reviewed the bank's annual statement before they deposited their money into their accounts?

Definitely more than depositors in Nigerian banks!

The major depositors in Nigerian banks are most likely to be corrupt elements and criminals _{E.g. Charles Taylor-Zenith Bank!}

And besides most of the customers of the banks you mentioned above trust thier banks anyway, correspondence is good and they are well informed!

strangleyo:

How many depositors of CityBank, RBC, Bank of Montreal, Barclays Bank, HSBC and Northern Rock reviewed the bank's annual statement before they deposited their money into their accounts?

Naija is presently a state where anything goes and If you cant beat them, .