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TRANSFORMING PUBLIC SECTOR BANKS

-An Investor’s Perspective -

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TOPICS

• WHY INVEST

• WHAT AN INVESTOR WANTS TO GET

- Transformation Concerns

• WHAT CAN HAPPEN IN PRACTICE

• LESSONS GOING FORWARD

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WHY INVEST

A Variety Of Motives Open New Markets Add Value - Build Shareholder Funds

and Profitability Early Mover – Jump Start On Value

Creation Support Infrastructure Development Complement Commercial Interests

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WHAT THE INVESTOR WANTS TO GET

A Clear Definition Of The Served Market

Geographic Focus Sectoral Focus Ring-Fenced Public Sector Lendings Choice of Distribution Channels

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WHAT AN INVESTOR WANTS TO GET

A Strong Management Team An Experienced CEO Balanced Team of Professionals Recognition of Benefits of

Outside Experience

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WHAT AN INVESTOR WANTS TO GET

A Clear Business Plan The Importance of the Strategic

Planning Process The Conflict Between Operational

and Strategic Priorities Competitor Analysis

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WHAT AN INVESTOR WANTS TO GET

Capability Building Distribution Channels Internal Systems and

Procedures MIS People Strengths and

Weaknesses

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WHAT AN INVESTOR WANTS TO GET

Governance and Regulation Independent Chairman and

Board Role of the Regulator Commercial and Legal

Framework Auditing and Inspection

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WHAT AN INVESTOR WANTS TO GET

Strong Investor and Capital Base Spread of Investors Government Role Risk Weighted Capital Adequacy Properly Structured Balance

Sheet

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WHAT AN INVESTOR WANTS TO GET

Change Management Skills Defined “New” Roles Implementation Planning Proper Communication with Customers

and Staff Ongoing Capability Assessment

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WHAT AN INVESTOR WANTS TO GET

• A Clear Definition of the Served Market

• A Strong Management Team• A Clear Business Plan• Capability Building• Governance and Regulation• Strong Investor and Capital Base• Change Management Skills

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WHAT CAN HAPPEN IN PRACTICE

Problems, Mistakes and Mishaps

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WHAT CAN HAPPEN IN PRACTICE

Failure to Tackle Necessary Management Changes

Autocratic Management Teams Skill “Imbalances” Conflicts of Interests

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WHAT CAN HAPPEN IN PRACTICE

Governance or Regulatory Weaknesses Overbearing Chairperson Unduly Weak or Strong Boards Political Interference Inconsistent Central Bank Supervision Lack of Proper Legal Framework

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WHAT CAN HAPPEN IN PRACTICE

Misunderstanding/Mispricing of Risk Asset Quality Institutional Loans Foreign Exchange and Treasury Risk Mismatching of Equity Base

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WHAT CAN HAPPEN IN PRACTICE

Conflicting Investor Roles Short – versus - Long Term Goals Passive Investors Conflicts of Interests

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WHAT CAN HAPPEN IN PRACTICE

Poor or Non-Existent Business Planning

Lack of Focus “If You Don’t Know Where You’re Going, All Roads Lead There”

Technology Waste/Overkill The Price of Poor MIS The Triumph of Bureaucracy

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WHAT CAN GO WRONG

Cultural Myopia Ignoring Local Business and Banking

Practices. Failing to Communicate Change to

Customers and Staff Not Recognising the Gradual

Pragmatic Nature of Change Management.

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LESSONS GOING FORWARD

• The Need to Recognise the Holistic Nature of Bank Transformation

• The Importance of the Integrity of the Local Banking Systems

• The Critical Roles of Governance, Regulation, Supervision and Review

• Changing Global Context• Why External Investors Matter• How The World Bank and the IFIs Can Help