- Total loan impairment of N565.615bn in 5 years shrink profitability
- CBN goes tough on Bank’s debt recovery
- Demand for Bank’s shares rise on new Board structure
The trending news last week about the change of Board of First Bank of Nigeria generated a lot of concerns from the investing public as regards the fate of First Bank going forward. Concerns have been raised about the new Board structure and how the share price of the Bank will be affected. Others also raised concerns that the management may face challenge from the loyalists of ousted Directors.
FBNH since 2016 has been under regulatory forbearance of CBN and the apex bank has been actively involved in corporate restructuring of the bank. CBN had granted regulatory forbearances to enable the bank work out its non-performing loans through provision for write off of at least N150 billion from its earning for four consecutive years.
FBNH had recorded a total loan impairment of over N565 billion between 2016 and 2020. Between 2016 and 2017, N376.461 billion which is more than half of the total loans impaired were provided for. In 2020 year end N50.596 billion was recorded as impairment charge for losses. In 2019, N51.093 billion was recorded as loan impairment. In 2018, it was N87.465 billion; in 2017 it was N150.424 billion and in 2016, it was 226.037 billion.
Without any iota of doubt, it is very obvious that the change of Board for First Bank is a blessing in disguise for the financial institution. It was learnt that insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank.
Now that the Board has been restructured by CBN and mandate has been given to recover debts from ousted Board members with immediate effect is an indication that the FBNH is on the path to healthy financial state.
Most capital market operators pointed out that share price FBNH now has capacity for upward journey as people sitting on the neck of the financial institution has been removed. The total volume of transactions in the bank’s shares after the new Board announcement show that there were more investors interested in buying the bank’s shares than wanting to sell. The share price of the Bank on Friday eventually closed at N6.90.
Looking at the construction of the new Board for FBNH and First Bank Nigeria Limited, they are not strangers to the bank. For instance, Mr Remi Babalola, the new Chairman of the Holding Company was at a time an executive director of the Bank. Mr Oye Hazzan Odukale who has been appointed has the Chairman of the Bank, has been a director in the bank for not less than 10 years. If you look at some other members of the Board for the two institution, that is the Bank and the Group, they are people that have been either on the Board or Management of First Bank at one time or the other in the past.
To a large extent, there is not going to be any negative figures for bank as a result of the sack of their Board. The Central Bank did not alter the management of the two institutions, the Deputy Managing Director of First Bank Nigeria Limited, Gbenga Shobo, who was earlier announced as the Managing Director of the Bank, still remains as the Deputy Managing Director. The two other guys remains as Executive Directors; they were not touched. U.K Eke also remains as the Managing Director of the Holding Company.
It is the Management that operates in an institution. So people that will because of the current issue decide to sell the shares of FBNH will later see that they are making a mistake.
The Central Bank has given order that some of the loans been held by some members of the terminated Board should be recovered. So, this is a win- win situation for the bank.
Technically speaking, this is an opportunity for people to go and buy more shares of FBNH. It should be an opportunity to gather money to buy more of First Bank shares.
For those who really understand how investment works, this kind of information will make people multimillionaires in the shares of First Bank.