Michael Jordaan – Best banking CEO of his generation

Former FNB CEO Michael Jordaan is widely seen as the best banking CEO of his generation who created tremendous value for FirstRand shareholders and FNB clients.

Under his leadership, FNB showed strong subscriber growth and was named the most innovative bank in the world at the 2012 BAI-Finacle Global Banking Innovation Awards.

As a result of Jordaan’s brilliant performance, FirstRand’s share price rose from R5.54 to R35.70 over a decade, which translates into a 20% annualised return.

What makes his performance particularly impressive is that he achieved it despite the fact that he had to steer the bank through the great financial crisis of 2008.

To understand how Jordaan, as a young CEO, was able to outperform his peers, you must go back to the eighties when he matriculated from Paul Roos Gymnasium.

After leaving school, he completed M.Comm in economics and PhD in banking supervision degrees at Stellenbosch University. These qualifications provided a strong foundation for his career in banking.

He joined the management trainee programme at Deutsche Bank in Hamburg, with on-the-job training in all aspects of banking.

In 1992, he became a corporate banker with Deutsche Bank in Frankfurt where he marketed corporate banking products.

He returned to South Africa in 1994, where he joined a programme in the credit and corporate finance divisions of Rand Merchant Bank.

Between 1996 and 1999, he served as CEO of Origin Bank, followed by chief executive positions at FNB HomeLoans,, and FNB’s customer solutions division.

These positions prepared him well to lead FNB, and in 2004, at the age of 36, he took the reigns at the bank.

Under Jordaan’s leadership, FNB prospered and became the bank of choice in South Africa.

  • Between 2005 to 2011, FNB increased its customer base from 4.4 million to 7.1 million.
  • Deposits made with FNB increased by almost 400%.
  • Loans to customers of FNB increased almost 18 times.
  • FNB’s profit increased from R904 million in 2003 to R7.4 billion in 2013.

Jordaan left FNB in 2013 following an incredible period of growth under his tenure as chief executive.

It raises the question of what made Jordaan such a successful leader.

Daily Investor asked Jordaan what he thinks are the most important factors that helped him achieve his goals. He highlighted three points:

  • Deep industry insight. The real magic happens in the last 1% of industry knowledge. For example, few banking CEOs globally know exactly how Return on Equity is calculated for their different business lines. However, understanding the varying cost of capital is an essential part of maximising value creation. Or they don’t have deep insight into the yield curve and interest rate maturity transformation, but this is the essence of banking.
  • Surrounding yourself with people who are better than you, and challenging them to deliver more than they knew they were capable of by empowering them to get on with it. Sometimes the CEO needs to get out of their way. The role of the CEO is not to make great business decisions. Instead, it is to facilitate great decision-making. Great people hate being micro-managed. The CEO needs to help them win.
  • A cultural revolution that promotes intrapreneurship and innovation. In my experience, many preach this, but few truly operate with the commercial savvy and smart risk-taking that is required in a hyper-competitive world. Of course, it all starts with giving the customer great value. If this means cannibalising yourself, then embrace the inevitable future rather than defend the unsustainable.

Daily Investor spoke to former FNB employees who served under Jordaan, and they confirmed that Jordaan empowered his staff.

They also respected him for having exceptional knowledge of the banking industry, which included small details at bank branches and other units.

One former FNB employee said Jordaan would regularly visit her division, and although she was not an executive, he would remember her name and always discuss her work with her.

Others describe him as an inspirational leader interested in employee feedback to improve operations.

Like many top CEOs, including Steve Jobs and Bill Gates, Jordaan understood his business exceptionally well and was involved in all aspects of FNB.

FirstRand and FNB’s performance under Michael Jordaan

The charts below show FirstRand and FNB’s performance during Michael Jordaan’s tenure as FNB CEO.

The dip in 2009 and 2010 was a result of the 2008 financial crisis, which crushed many banks and financial institutions.

Jordaan helped FNB to navigate the crisis without a huge reduction in performance.

FirstRand share price