How Nigeria’s Oldest Bank Withstands Board Room and Market Storms – Business – The Guardian Nigeria News – Nigeria and World News

Its existence predates the country, whose financial landscape it will span like a colossus. It was founded in 1894, three years before the country was named “Nigeria”, and remained a relics of British imperialism for almost a century before its corporate entity was fully localized.

And it was, indeed, the first in many ways. It is the oldest bank in Nigeria. It was also the first Nigerian listed company to achieve the magical capitalization of N1 trillion. As it has grown with the country’s burgeoning economy, it has achieved several firsts, assuming its status as Nigeria’s most trusted financial partner.

He did it all not on a bed of roses. First, he had to get rid of the imperialist gown and become truly indigenous. If this was an easy battle, as the nascent economy wanted a bank it couldn’t get elsewhere, the battles that followed may not have been.

Among other things, it survived the 2004 rebasing, which reduced the number of commercial banks from 89 to 25 and increased capilisation from 2 billion naira to 25 billion naira. As banks were inundated with liquidity, most of them threw caution out the window, which led to regulatory intervention in 2009. Again, it spread for what many experts said. attributed to its uncompromising conservative banking approach. On several occasions the bank has “rebooted” and has done so successfully, becoming even more competitive.

But today, a sense of apprehension, uncertainty and fear permeates his offices and the entire system. FirstBank of Nigeria Limited with its holding company, FBN Holdings Plc, is grappling with similar challenges which have led many of its competitors to fail. The institution, which is among systemically important banks otherwise considered too big to fail, has made more headlines for the wrong reasons this year than any other business entity in the country.

Just when the market thought there was an air of stability, Rémi Babalola, a former minister and bank executive, resigned from the tower as chairman of the holding’s board of directors. The company’s communication, when contacted by The Guardian, did not provide the reasons for the hasty resignation and did not provide enough information in the announcement by the Central Bank of Nigeria (CBN ), who announced the resignation.

But there have been reports of continuing struggles within the board, which previously led to the appointment of the former minister. “I accepted the appointment as a non-executive director and chairman of the board of directors of FBN Holdings PLC on April 30, 2021 as a call to national service, an opportunity to deploy my endowments to enlighten humanity. Since then it has been a test of hard work, sacrifice and battle, ”an online newspaper reportedly cited Babalola’s resignation letter.

“With the decay, stench and corruption of the system, it was virtually impossible for me to break; and after deep reflection and biased towards my personal values, I am writing to formally resign from my appointment as a non-executive director and chairman of the board of directors of FBN Holidays PLC, with immediate effect. This should give enough time to the shareholders of the institution to plan a smooth transaction until the next annual general meeting, ”Babalola reportedly wrote to the CBN.

Babalola was given the leadership position after apex bank ousted the former boards of directors of the bank and its holding company. The ousted board members removed Adesola Adeduntan as chief executive / managing director of FirstBank of Nigeria, a decision the regulator revised after an exchange with the board. The day after the battle was the emergence of Babalola, who was to oversee a rapidly changing FirstBank.

The recent board change came days after billionaire oil mogul Femi Otedola increased his stake in the old bank to 7.57% to become a clear majority shareholder. He had previously acquired 1,818,551,625 units (5.07%) of the issued share capital of the company of 35,895,292,791. With the recent acquisition, the famous investor holds a total of 2,717,282,140 units of actions.

In the wake of the disclosure of his current stake, Otedola said: “I am simply an investor, who saw an opportunity in the financial institution and decided to take advantage of it thanks to the investment I made. My interest, contrary to speculation, is not to become president of the bank or its HoldCo. In addition, I am in semi-retirement.

Otedola was reportedly in a property dispute with Tunde Hassan-Odukale, president of the banking subsidiary. While Otedola dispelled speculation about his interest in gaining control and was not interested in a board position, analysts said proxy control is common in the leadership of a business. Many also suggest that the latest stock purchase was an attempt to consolidate control.

Ahmad Abdullahi, former director of the CBN and member of the board of directors of the Africa Finance Corporation (AFC), the Nigeria Deposit Insurance Corporation (NDIC) and the Asset Management Corporation of Nigeria (AMCON), is expected to contribute. Bank stabilization experience.

But privileged sources told The Guardian that the scale of the crisis goes beyond expertise and experience, and that “conflict of interest permeates the whole system.” Another source suggested that some senior bank executives are on the verge of “new boards planning a complete overhaul of the system.”

Some analysts believe that the current crisis offers an opportunity for the bank to reposition itself. Invest Data Ltd’s COO Ambrose Omorodion said that Otedola in the photo sends a strong message, which means many investors could wait on the sidelines to take a share of the elephant.

“It’s a blessing in disguise. The transformation will make the bank stronger and focus on its core businesses. The third quarter result was not impressive, and I don’t see how the fourth quarter will be better. But Otedola in the photo will make the difference. Hopefully the change will strengthen its governance. The numbers may not spark interest in action, but changes can, ”Omorodion.

Victor Ogiemwonyi, a retired investment banker, also suggests that Otedola could inject new blood into the system as he said: “he is only interested in the opportunity”. If he’s genuinely interested in the opportunity, he might go on a headhunt to drive change to transform the process.

For Ogiemwonyi, regulatory coverage amounts to insuring his money before going to a casino. If you win you keep your money but when you lose you are covered.

David Adonri of Highcap Securities Limited traced the bank’s problem to the 2009 crisis, noting: “FirstBank has been on a fragile pedestal since the global collapse. Some people had monopolized the bank’s resources for personal appropriation. The withdrawal of these forces has left a vacuum precipitating the current struggle to hijack the institution. The current mess is likely to erode the confidence of investors and depositors. Since FirstBank is too big to go bankrupt, the CBN could tighten its control over the bank until the board turmoil subsides. “

But Godwin Owoh, professor of applied economics and expert in banking, said the casino-like attitude is what brought FirstBank to where it is today, and warned that the mindset of the too big to fail would continue to build morale. dangers and rob the poor to pay the rich. He insisted that it was time for the umbrella bank to cut the plug and allow FirstBank to go bankrupt or survive on its merits, because no company is indeed too big to fail.

The bank has been subject to apex bank forbearance since 2016. Owoh insists: “We cannot continue to pay for the recklessness of a few investors and managers with public money.” It challenges the logic of the too big to fail when the economy is not supported by any particular bank.

The outcome of the current corporate turmoil could determine the bank’s status in the financial system and whether it will be classified as too big to fail in the coming decades. Of course, FirstBank is no longer the JPMorgan of the Nigerian financial space. Its elephant hallmark remains, but its true value and market position has not remained as daunting as the logo suggests.

Players, once considered marginal, overtook it at the turn of the last 20 decades in terms of asset size, market valuation, earnings and profitability. For example, with 427.3 billion naira, it ranked fourth in terms of gross profit in the third quarter of the year and sixth in profit after tax (PAT). Its profit margin is 9.5%, the smallest of the top six banks.

The bank’s non-performing loan (NPL) was 7.7% in 2019 against the tolerable level of 5%. It had the highest NPL among the five systemically important banks. In its 2020 audited statement, it recorded the largest increase in NPLs with Access Bank (whose NPLs were below 5% so far) when it rose to 5.8%. Last year, FirstBank’s NPL rose 22.2% to 9.9%, almost double the recommended allocation.

The concern of the sector is not to know how the bank behaves in the market that it has dominated for several decades, but to know if and how it emerges from this war of attrition with a minimum of blues. How Otedola and other players will react to the new turn is a clue that market participants are watching as the bank seeks to reinvent itself.

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