Its existence predated the country, whose financial landscape it would bestride like a colossus. It was founded in 1894, three years before the country was named ‘Nigeria’, and remained part of the relics of British imperialism for almost a century before its corporate entity was fully localised.
And it was, indeed, first in many ways. It is Nigeria’s oldest bank. It was also the first Nigerian quoted company to hit the magical N1 trillion capitalisation. As it grew with the country’s nascent economy, it acquired several firsts, assuming its status as corporate Nigeria’s most dependable financial partner.
It achieved all of this not on a bed of roses. First, it had to put off the imperialist toga and become truly indigenous. If that was an easy battle, as the budding economy desired a bank it could not get elsewhere, the subsequent battles were, perhaps, not.
Among others, it survived 2004 rebasing, which pruned the number of commercial banks from 89 to 25 and moved up capilisation from N2 billion to N25 billion. As banks became awash with liquidity, most of them threw caution through the window, leading to the 2009 regulatory intervention. Again, it scaled through for what many experts attributed to its diehard conservative banking approach. On several occasions, the bank ‘rebooted’, and did so successfully, emerging even more competitive.
But today, a sense of apprehension, uncertainty and fear pervades its offices and the entire system. FirstBank of Nigeria Limited with its holding company, FBN Holdings Plc, grapples with similar challenges that led to the failure of many of its competitors. The institution, which is among the systemic important banks otherwise considered too big to fail, has made more headlines for the wrong reasons this year than any other corporate entity in the country.
Just when the market thought there was an air of stability, Remi Babalola, a former minister and executive of the bank, resigned from the tower as board chairman of the holding company. The corporate communication, when contacted by The Guardian, was neither forthcoming with reasons for the hasty resignation nor were there sufficient insights in the announcement by the Central Bank of Nigeria (CBN), which announced the resignation.
But there were reports of continuous boardroom tussle, which had earlier led to the appointment of the former minister. “I accepted the appointment as a non-executive director and chairman of the board of FBN Holdings PLC on April 30th 2021 as a national call to service, an opportunity to deploy my endowments to illuminate humanity. Since then, it has been a slug of hard work, sacrifices and battles,” an online newspaper reportedly quoted from Babalola’s resignation letter.
“With the rot, stench and corruption in the system, it has been well-nigh impossible for me to break; and upon deep reflection and partial to my personal values, I write to formally resign my appointment as a non-executive director and chairman of the board of directors of FBN Holidays PLC, effective immediately. This should allow ample time for the institution’s shareholders to plan a smooth transaction through the next Annual General Meeting,” Babalola reportedly wrote to the CBN.
Babalola was saddled with the leadership position after the apex bank ousted the former boards of the bank and its holding company. The ousted board members had removed Adesola Adeduntan as the Managing Director/Chief Executive of FirstBank of Nigeria, a decision the regulator revised after a back-and-forth with the board. The aftermath of the battle was the emergence of Babalola, who was to oversee a fast-mutating FirstBank.
The recent change in the board came a few days after Femi Otedola, a billionaire oil magnate, increased his shareholding in the legacy bank to 7.57 per cent to emerge a clear majority shareholder. He had earlier acquired 1,818, 551,625 units (5.07 per cent) of shares from the company’s issued share capital of 35,895,292,791. With the recent acquisition, the famous investor holds a total of 2,717,282,140 units of shares.
On the heels of the disclosure of his current shareholding, Otedola said: “I am simply an investor, who saw an opportunity in the financial institution and decided to take advantage of it through the investment I have made. My interest, contrary to speculations, is not to become chairman of the bank or its HoldCo. Moreover, I am in semi-retirement.”
Otedola has reportedly been in an ownership tussle with Tunde Hassan-Odukale, chairman of the banking subsidiary. While Otedola dispelled speculation over his interest in taking over control and that he was not interested in a board position, analysts said control by proxy is common in corporate leadership. Many also suggest that the latest share purchase was an attempt to consolidate his control.
Ahmad Abdullahi, a former director of the CBN and board member of the Africa Finance Corporation (AFC), the Nigeria Deposit Insurance Corporation (NDIC) and the Asset Management Corporation of Nigeria (AMCON), is expected to bring his experience to bear in stabilising the bank.
But insider sources told The Guardian that the scale of the crisis goes beyond expertise and experience, and that “the conflict of interest permeates the entire system”. Another source suggested that some top executives of the banks are on the edge as “the new boards plan a total overhaul of the system”.
Some analysts believe the current crisis offers an opportunity for the bank to reposition. Chief Operating Officer Invest Data Ltd, Ambrose Omorodion, said Otedola in the picture sends a strong message, which means many investors could be waiting on the sidelines to take a slice of the elephant.
“It is a blessing in disguise. The transformation will make the bank stronger and focus on core operations. The result of the third quarter was not impressive, and I don’t see how the fourth quarter will be better. But Otedola in the picture will make a difference. Hopefully, the change will strengthen its governance. The numbers may not drive interest in the share but the changes may,” Omorodion.
Victor Ogiemwonyi, a retired investment banker, also suggests Otedola could inject fresh blood into the system as he said: “he is interested only in the opportunity”. If he is truly interested in the opportunity, he could go for a headhunt to drive changes to transform the process.
For Ogiemwonyi, the regulatory cover is like insuring your money before visiting a casino. If you win, you keep your money but when you lose, you are covered.
David Adonri of Highcap Securities Limited traced the problem of the bank to the 2009 crisis, noting: “FirstBank has been on a shaky pedestal since the global meltdown. Some people had cornered the resources of the bank for personal appropriation. The removal of those forces has left a vacuum precipitating the current struggle to hijack the institution. The current mess is capable of eroding investors’ and depositors’ confidence. Since FirstBank is too big to fail, CBN may tighten its control over the bank until the boardroom turmoil subsides.”
But Godwin Owoh, a professor in applied economics and expert in banking operation, said the casino-like attitude is what has brought the FirstBank to where it is today, and warned that the too-big-to-fail mentality would continue to breed moral hazards and rob the poor to pay the rich. He insisted it was time the apex bank pulled the plug and allowed FirstBank to fail or survive on its merit as no company, indeed, is too important to fail.
The bank has been on the forbearance of the apex bank since 2016. Owoh insists: “We cannot continue to pay for the recklessness of a few investors and managers from the public purse”. He questions the rationale of too big to fail when the economy is not sustained by any particular bank.
The outcome of the ongoing corporate turmoil could determine the status of the bank in the financial system and whether it will be classified as too big to fail in the next few decades. Of course, FirstBank is no longer the JPMorgan of Nigeria’s financial space. Its elephant trademark remains but its true worth and market posture have not remained as intimidating as the logo suggests.
Players, once considered marginal, at the turn of the last 20 decades have overtaken it in terms of asset size, market valuation, earnings and profitability. For instance, with N427.3 billion, it came fourth in terms of gross earnings in the third quarter of the year and ranks sixth in profit after tax (PAT). Its profit margin is 9.5 per cent, the smallest among the top six banks.
The bank’s non-performing loan (NPL) was 7.7 per cent as of 2019 against the five per cent tolerable level. It had the highest NPL among the five systemic-important banks. In its 2020 audited statement, it recorded the steepest rise in NPL besides Access Bank (whose NPL was less than five per cent until then) when it rose to 5.8 per cent. Last year, FirstBank’s NPL went up by 22.2 per cent to 9.9 per cent, almost twice the recommended allowance.
The concern in the industry is not how the bank performs in the market it dominated for several decades but whether and how it emerges from this war of attrition with minimal bruises. How Otedola and other actors will respond to the new twist is a clue the market operators are watching out for as the bank seeks to reinvent itself.
