Oladipupo Ehindero – Make Sure You Trust the Management of the Banks You Invest In

Jun 4, 2020

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Oladipupo “Dipo” Ehindero is an independent analyst and was Head of Research of a mid-size asset manager before pursuing his Master’s degree. He has been in the research and investment banking space for over 10 years. He also has a passion for human resource management, having previously worked in that area.

“Never play with your documentation. Make sure you keep personal records of every single transaction.”

Oladipupo Ehindero

Worst investment ever

Oladipupo was on an internship with an asset manager in Lagos when the federal government of Nigeria made law through the central bank that all the banks in Nigeria should recapitalize. So he was told to also participate in bringing clients and advise them on what to buy and what to sell.

Oladipupo went out and began making cold calls, meeting high net worth individuals, and trying to build his network.

Landing his first client

Oladipupo finally met a lady who was looking to invest her money in a bid to raise college money for her two daughters. The lady didn’t have a lot of money; nonetheless, it was a substantial amount to invest.

Oladipupo advised her to split her investment money into two, and they invested one half in bank stocks and the other half in a medical diagnostic company.

Ignoring his senior’s advice

Oladipupo was feeling quite excited after landing this client as he was now more confident about his career growth. One of the senior managers got to know about Oladipupo’s client and the investments they had settled on.

While he was proud of Oladipupo’s effort, he advised him not to invest in the bank he had chosen because the president of that bank didn’t have a good reputation. The manager suggested another bank whose MD was a better person than the president of the bank he had invested in.

Oladipupo, however, felt that all the banks were the same, and thus he trusted that his choice was good enough for his client.

Time to cash out

A few years later, Oladipupo received a call from his client, who informed him that one of her daughters had been accepted into a medical school in Hungary and wanted to know how her investment was doing. At this point, her portfolio had grown from $10,000 to $57,000. This was enough to kickstart her daughter’s education in a year.

Tragedy strikes

Three months after Oladipupo talked to his client, the president of Nigeria died, and the vice president became the president. A new bank governor also came in, and the first thing he did was to say that some banks had been using the recapitalization money for illegal purposes, such as investing in the oil and gas sector. So he removed the bank MDs from the opposition and nationalized the banks.

The bank that Oladipupo had invested in for his client issued a profit warning saying that it wasn’t going to make as much money again because they had a lot of bad debt to figure out. Stocks that were roughly selling for 60 Naira per share were now selling for approximately 10 Naira per share, an 80% drop!

The client wants her money now

Oladipupo’s client came to his office in tears; she desperately needed the money for her daughter’s tuition because turning down or defaulting the medical school admission was not an option. But no one was willing to buy stock from the bank that was practically on its knees.

His parents come to the rescue

Oladipupo talked to his parents about the situation with the client, and they committed to helping him out. His parents decided to take up the investment and had the stocks crossed into their account. They took out a loan and paid the woman off by the sum of $5,000 equivalent to what she had initially invested three years ago.

His woes were not yet over

Unfortunately, the stocks kept losing value to a point where Oladipupo’s parents had to sell some of their properties to pay off the bank loan they used to pay the client. The stock prices fell from 60 Naira to 3 Naira per share. Oladipupo’s parents consequently lost a lot of money on the investment.

Lessons learned

Enthusiasm is good, but skills and experience are even better

Having passion when you’re new in business is very good because it gives you drive. But, expertise and experience are better because these are the qualities that will help you know which investment is good, who is a good person in the markets, which companies are well managed, and, therefore, make better investment decisions.

Andrew’s takeaways

Manage risk with diversification

If you don’t want to lose everything at once, consider diversification and owning many different assets. Unfortunately, in Nigeria and many other countries, there aren’t a lot of stocks available for investment.

Be careful when investing in banks

Banks are very high risk, and you should tread carefully when investing in them. Banks are just an arm of the government, and the government can do anything they want with banks. So there are risks that come with investing in banks that you wouldn’t experience with a traditional company.

Banks have a meager amount of capital compared to a normal company. A tiny mistake by a bank can cause a massive shakeup in the share price.

Actionable advice

Trust is key. You have to get your investor to believe you in your dealings with them, no matter how short term it seems. Documentation is also critical. Make sure you keep records of every single transaction.

No. 1 goal for the next 12 months

Oladipupo’s number one goal for the next 12 months is to return to the asset management world. He wants to get into impact investing.

Parting words

“Be brave. It’s a new world we’re living in, and opportunities are all around us.”