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LEADERSHIP AND FIRSTBANK’S SUCCESSFUL TRANSITION TO ‘CLICK’ BANKING

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BREAKING: First Bank recovers N456 Billion loan from Heritage Bank before license revocation

LEADERSHIP AND FIRSTBANK’S SUCCESSFUL TRANSITION TO ‘CLICK’ BANKING

In December 2015, the share price of First Bank of Nigeria Limited was trading around N4.8 band. About seven years later, precisely last December, the value held tightly to N15, growing by over threefold amid general asset and economic doldrums.

The steep rise in the valuation of the financial institution deviates remarkably from the average performance of FUGAZ, an acronym describing the top five Nigerian banks by market capitalisation. In the past seven years, the share prices of the leading banks appreciated by an average of 90 per cent as against over 200 per cent growth seen in FirstBank.

Deflated by the bank’s exceptional performance, Access Holdings, GTCO, UBA and Zenith stocks posted about 60 per cent growth. The performance of the entire banking sector also flattens out when compared with FirstBank, which raises questions about the fundamentals of the bank and its growth trajectory.

In terms of inflation-adjusted return on investment, FirstBank shareholders are among the investors that emerged from the turbulent years with a positive real rate of return. Was it a stroke of luck? Does the market reward poor performance?

Of course, stocks sometimes thrive on mere greater fool theory, thus triggering an asset bubble. But the positive share movement of the premier bank is but only one of the many high growth indicators.

In first quarter of 2023, the bank’s non-performing loan (NPL) ratio came down far below the five per cent regulatory threshold, which means so much difference when placed in a historical context. As at December 2015, its NPL ratio was over 45 per cent, a telling reflection of the level of effort that went into cleaning its books in the intervening years. For analysts, the cleanup, which was done without raising fresh capital, explains what disciplined, focused and forthright leadership could achieve.

On cleanup process, the Bank CEO, Dr. Adesola Kazeem Adeduntan, said the institution was “its self-created AMCON”, referring to the Asset Management Corporation of Nigeria set up in the aftermath of the 2008 financial crisis to buy up the threatening toxic assets of Nigerian banks.

Indeed, what the management of the bank has done in the past seven years is not remarkably different from the role of AMCON, since its creation in 2011, except that the former raised fresh capital for its humongous responsibility whereas the bank did not. Also, the FirstBank experience was internal; and it did face a tougher task in terms of the proportion of its assets that had gone bad.

At the height of the financial crisis in 2008/2009, the NPL ratio rose to 37.3 per cent, from 9.9 per cent on record in 2007. On the other hand, the premier bank was carrying over 45 per cent NPL on its book as at January when Adeduntan took the reins of its leadership as the managing director.

All through the process, the bank did not raise fresh capital for the housecleaning programme, meaning the shareholders’ value was not diluted in the process.

Investors may have also kept in view other impressive qualitative metrics such as pre-tax return on equity (RoE), a measure of net income in proportion to shareholders’ equity, which moved from 0.6 to 17.3 per cent at the end of last year’s financial cycle. Also, pre-tax Return on Asset (RoA) climbed from 0.1 to 1.6 per cent while the cost of risk was also down to 1.7 per cent last year, from 10 per cent recorded in its 2015 financial.

At the end of this month, Adeduntan would have spent 7.5 years in office and he would be 30 months short of the tenure limit requirement. Already, he is the longest-serving chief executive of the institution, which is known for its short-term leadership tradition. Casual observers consider him as fortunate, but deep analysts think differently – the bank has been fortunate to have had him.

The lender, which predated ‘Nigeria’, and played the most active financial role in the structuring of the country’s pre- and post-Independence economy, may have just got its groove back under the current management. The books are clean and the NPL is trending downward, faster than the industry average. But beyond, its top and bottom lines are all out of the woods and climbing.

Its total assets, for instance, have increased by 167 per cent in the past seven years, meaning that its asset size has almost tripled, which also outperformed the industry growth. In terms of liquid asset to total asset ratio, it is also ahead of most of its peers. This suggests that while the quality of its assets has increased remarkably, with the NPL ratio falling by 88 per cent in less than a decade, the bank’s asset growth has not stalled, which speaks volumes about the quality of its risk management approach.

Currently, FirstBank had in its portfolio of about 41 million customer accounts, an extraordinary 276 per cent lift from its 2015 record. The figure is about 30 per cent of total bank accounts held by Nigerian banks. Customer depositors also jumped by as much as 153 per cent to 10.6 trillion.

The growth seen is also robbing off on the bottom line with the profit before tax (PAT) increasing by N137 billion in the period. That translates to over 1300 per cent, probably contributing majorly to the sudden spike in the share of the bank.

Perhaps, owing to its long history dating back to when banks were mostly associated with corporate and public sector financial infrastructure, FirstBank was mostly seen as a go-to for savers and borrowers. But that seems to have changed with its many smart digital channels. For its management, that is deliberate.

“Our goal is to transform the bank from lending-based to a transaction-based financial institution,” the chief executive pointed out.

Yes, its transformation is no longer a dream. From zero share of corporate e-bill payments, it has shoved its competitors behind to take hold of 42 per cent of the market. The bank, in the words of its managing director, has pivoted from brick and mortar to “brick and click”, making payment seamless and a click away for individuals, corporate as well as public entities.

“We have built a very formidable trade and cash management platform that we call FirstDirect, which allows corporate banking customers, from the comfort of their home, to initiate a trade transaction and complete it. You have a single view, giving you an interface where you can add your different accounts and transact,” Adeduntan explained.

FirstMobile, a standalone digital bank, has also emerged as a household name in the financial technology ecosystem. In 2015, when the platform was still at its teething age, its users were about 60,000 a number that soared to over six million (a growth of over 10,000 per cent). That has contributed immensely to the changing tradition of banking with FirstBank, as about 85 per cent of its transactions are now initiated via digital windows.

FirstMobile appears to have hit the bull’s eye in the bank’s reinvention drive and effort to appeal to younger demographics. But the platform itself is merely one of the potpourris of telecommunication-driven initiatives it has taken on to get the young depositors on board. FirstOnline users have also grown from about 90,000 to over one million within the timeframe just as its USSD, which targets feature phone users, is even more successful with users increasing by close to 3,000 per cent in seven years to 14.7 million.

Overall, its digital banking has evolved in both volume and public impression. Ease, convenience and reliability have moved the customer base from its tiny 0.6 million to 22 million.

Indeed, FirstBank is transmuting into a transaction-led institution. Last year, the volume of transactions hit 17 million, 8.5 times what it was in 2015 when it experienced some corporate turbulence. But the growth is not only in volume terms, as its non-interest income ratio hit 40.6 per cent for the first time last year, which aligns with the strategic direction of the current management in weaning the group from excessive credit risk exposure.

Over the years, most Nigerian banks have consolidated their global outlook. FirstBank has led the pack with its 40-year United Kingdom subsidiary, which is bigger than some of its competitor wholesale operations back home. But some of the pro-offshore Nigerian banks had been accused of extroversion and ego-seeking as most of the outposts were nothing but cost centres.

In the past few years, the assumption has been deflated; and the performance of the African subsidiaries of FirstBank is among what could be changing the tide. Before the 2015 change of the guard, the subsidiaries’ operations left had created a gaping hole in the PBT of the consolidated account. Last year, they contributed a combined 21.3 per cent to the group’s pre-tax profit.

But that was not because there was no risk out there. In the heat of the Ghanaian government debt crisis, Adeduntan revealed, FirstBank took the least impairment among Nigerian banks that were exposed to the crisis “not because we saw it coming but because we have consistently done the right thing and adopted best risk management practice”.

There is also a humane side to his management approach. Today, FirstBank is among the highest-paying Nigerian banks and offers the most attractive conditions of service, including training, accelerated career growth and many more. In 2021, its efforts were compensated with the Great Place to Work Award. Today, the once-touted conservative bank is attracting young and upwardly mobile professionals with the average age of its employees estimated at 39 years.

Being the longest-serving managing director of the pre-colonial financial behemoth, Adeduntan has the leverage of time and experience to enforce its transformational agenda. But he had also prepared for the job. At KPMG where he co-pioneered the firms’ financial risk management advisory services, he trained in almost all areas of human endeavors – presentation, people management, business writing and all sorts. On assumption of office, he was bold and firm in his decision to headhunt, institute new work culture, clear career growth blockages and challenged the status quo.

His courageous outing in the past seven and half years has transformed an institution once considered one of least prepared for the age of “brick and click” banking into the Usain Bolt of the emerging financial technology space.

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Federal Mortgage Bank of Nigeria disburses N440 billion, delivers 39,000 homes since 1993 – Shehu Osidi

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2 days ago

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July 25, 2024

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Federal Mortgage Bank of Nigeria disburses N440 billion, delivers 39,000 homes since 1993 – Shehu Osidi

Federal Mortgage Bank of Nigeria disburses N440 billion, delivers 39,000 homes since 1993 – Shehu Osidi

The Federal Mortgage Bank of Nigeria (FMBN) has revealed it has disbursed N440 billion and delivered approximately 39,000 new homes under the National Housing Fund (NHF) scheme since its re-establishment in 1993.

This achievement was highlighted by the bank’s Managing Director and Chief Executive, Mr. Shehu Osidi, during his presentation at the 18th Africa International Housing Show in Abuja.

His presentation, titled “Financing the Housing We Need: A New Dawn at FMBN as an Institutional Enabler,” detailed the bank’s accomplishments in housing finance.

Osidi noted that, in addition to the N440 billion disbursed and the 39,000 new homes delivered, FMBN has provided around 25,500 mortgages and extended over 120,000 micro-housing loans, all offered under a single-digit interest rate lending regime.

“Since its re-establishment in 1993, the Bank has delivered about 39,000 new homes, about 25,500 mortgages and over 120,000 micro housing loans, all within a single-digit interest rate lending regime.

“Under the National Housing Fund (NHF) Scheme, it has registered 26,350 organisations and over 5.8 million cumulative contributors with over 1 million accounting for the self-employed sector.

“The Bank has disbursed the cumulative of N440 billion under its various loan windows to drive affordable housing finance for the Nigerian economy,” Osidi said.

Additionally, the FMBN Managing Director disclosed that in compliance with the provisions of the National Housing Fund Act, the bank has refunded N84.8 billion to 492,604 contributors who exited the scheme.

More insights
Highlighting more achievements of the Federal Mortgage Bank of Nigeria (FMBN), Osidi noted the recovery of N12 billion from the Federal Ministry of Finance.

This recovery was part of the N19 billion in wrongful deductions of National Housing Fund (NHF) contributions, which had been previously misconstrued as revenue under the 40% deduction regime. He further mentioned that FMBN continues to engage with relevant authorities to halt these deductions and recover the remaining balance of the trapped NHF funds.

Additionally, he explained that FMBN has expanded its loan products from mortgage financing to include housing construction, micro-housing financing, and rent-to-own options. New additions such as Home Improvement and Rent Assistance loans specifically target the non-salaried informal sector.

Osidi highlighted that the bank’s clientele now includes primary mortgage banks, real estate developers, housing cooperatives, and individual NHF contributors. Despite modest numbers, he emphasized that FMBN remains a key player in the housing sector.

He also outlined the executive management’s seven-point agenda, which focuses on enhancing automation, promoting cost efficiency, improving credit quality, effective project management, and expanding strategic partnerships to transform FMBN into a responsive and reliable institution.

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Analysis: Fidelity Pension Managers 2023 audited company and fund accounts

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3 days ago

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July 24, 2024

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Analysis: Fidelity Pension Managers 2023 audited company and fund accounts

Analysis: Fidelity Pension Managers 2023 audited company and fund accounts

Fidelity Pension Managers recently published its 2023 audited accounts, providing a summary overview of its financial health and fund performance.

This report provides a summary review and presents key financial highlights, financial ratios, fund performance, and the trend in the number of Retirement Savings Account (RSA) holders.

Financial Highlights
Total Revenue: Total revenue for the company rose 23% to ₦2.59 billion in 2023, up from ₦2.1 billion in 2022. From the reports, this increase is attributed majorly to higher fee income generated from the pension funds it has under management.
Profit After Tax (PAT): PAT rose 26% to ₦666 million, up on the previous year’s 21% rise.
Operating Expenses: Operating expenses rose slower than revenue and PAT by 22% to ₦1.76 billion from ₦1.44 billion, leading to a slight drop in the company’s cost-to-income ratio, which fell to 67.98% from 68.57%. The company seems to be relatively prudently managing financial resources, amidst rising costs and inflationary pressures.
Shareholder’s Funds: The company’s shareholders funds ended the year at ₦5.95 billion in 2023 up 5% from the ₦5.64 billion in 2022.
Return on Equity (ROE): ROE was a very low 11.21%. Whilst this is a slight improvement on 2022’s 9.41%, the company does not seem to be efficiently deploying shareholders’ equity to generate profits.

 

Financial and Fund Highlights

Corporate Audited Annual Results

Financial Ratios

Fund Performance Highlights
RSA Funds Performance: Fidelity Pensions offers six of the seven regulated RSA pension funds to the public. Notably, all six funds put in a better performance than the previous year, whilst only four funds out-performed the industry benchmark returns (see our article on benchmark returns here).

5-Year Audited Pension Funds Performance

Number of RSA Holders
RSA Growth: The growth in the number of RSA holders was another highlight of the year. Fidelity Pension Managers saw an increase of 2.48% in RSA holders, adding 8,005 new accounts to close the year at 331,124 RSA holders.

Demographic Analysis
Age Distribution: The majority of 330,000 RSA holders (83.9%) registered in 2023 fell within the age bracket of <30 years to 39 years, indicating a young and growing industry subscriber base. Of the 2023 registrations, Fidelity Pension Managers recorded 2.43% of this growth.


Conclusion
Fidelity Pension Managers has demonstrated improved financial growth in 2023, marked by increased revenue, higher profitability, and a growing RSA customer base. However, the company remains constrained by low assets under management, which limits its fee-generating potential. To overcome this challenge, Fidelity Pension Managers must focus on enhancing the performance of the funds it manages and attracting more RSA holders. Improved fund performance will not only benefit current RSA holders but also make Fidelity Pensions an attractive option for those looking to transfer their pensions.

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Zenith Bank maintains its position as Nigeria’s top bank in terms of Tier-1 capital for the 15th consecutive year.

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5 days ago

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July 22, 2024

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Zenith Bank maintains its position as Nigeria's top bank in terms of Tier-1 capital for the 15th consecutive year.

Zenith Bank maintains its position as Nigeria’s top bank in terms of Tier-1 capital for the 15th consecutive year.

Zenith Bank Plc for fifteenth consecutive year has retained its position as the Number One Bank in Nigeria by Tier-1 Capital in the 2024 Top 1000 World Banks’ Rankings, published by The Banker Magazine.

This ranking places Zenith Bank Plc as the 565th Bank globally with a Tier-1 Capital of $2.01 billion. The rankings, published in the July 2024 edition of The Banker Magazine of the Financial Times Group, United Kingdom, recognise Zenith Bank’s continued financial strength and stability.

They are based on the 2023 year-end Tier-1 capital of banks globally and remain the primary source for global bank financials used by most international organisations in their assessments of banks.

Tier-1 Capital describes capital adequacy, the core measure of a bank’s financial strength from a regulator’s perspective. According to the ranking, Tier-1 Capital, as defined by the latest Bank for International Settlements (BIS) guidelines, includes loss-absorbing capital, i.e., common stock, disclosed reserves, retained earnings, and minority interests in the equity of subsidiaries that are less than wholly owned. A strong Tier-1 capital ratio boosts investor and depositor confidence, indicating the Bank is well-capitalised and financially stable.

Commenting on this achievement, the Group Managing Director/CEO of Zenith Bank Plc, Dame (Dr.) Adaora Umeoji, OON, said, “We are deeply honoured to be recognised as the Number One Bank in Nigeria by Tier-1 Capital for the fifteenth consecutive year.

“This recognition is a testament to our strategic focus on sustainable growth, innovation, and customer satisfaction. It also emphasises our resilience and strength in navigating the ever-evolving financial landscape.

“Our dedicated team of professionals has remained steadfast in ensuring that we maintain our position at the forefront of the banking industry.” She extended her profound and sincere appreciation to the Founder and Chairman, Dr. Jim Ovia, CFR, whose visionary and transformative leadership has played a pivotal role in cultivating a resilient and thriving establishment.

“She also expressed her deep appreciation for the board’s insightful governance, the staff’s relentless dedication, and the unwavering loyalty of the bank’s esteemed customers to the Zenith brand.

Zenith Bank’s financial performance for the year was driven by a remarkable triple-digit growth of 125% in gross earnings, from N945.6 billion reported in 2022 to N2.132 trillion in 2023.

This growth led to an improved market share in both the retail and corporate segments despite a persistently challenging macroeconomic environment. The increase in gross earnings was primarily due to growth in interest and non-interest income. Interest income growth was attributed to the increase in the size of risk assets and their effective repricing, while non-interest income was driven by significant trading gains and gains from the revaluation of foreign currencies.

Zenith Bank recently commenced recapitalisation efforts with the conclusion of its Capital Markets Day held on 11th July 2024. It aims to raise the least amount of capital amongst its peers at N230 billion, considering it already maintains a robust capital base of N270.7 billion.

The Bank remains dedicated to supporting the growth of the Nigerian economy and providing its numerous customers with innovative and efficient banking solutions.

Zenith Bank’s track record of excellent performance has continued to earn the brand numerous awards, with these latest accolades coming on the heels of several recognitions. These include being recognised as the Number One Bank in Nigeria by Tier-1 Capital for the fourteenth consecutive year in the 2023 Top 1000 World Banks Ranking, published by The Banker Magazine.

The Bank was also awarded the Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards for 2020 and 2022; and Most Sustainable Bank, Nigeria in the International Banker 2024 Banking Awards.

Further recognitions include Best Bank in Nigeria for three consecutive years from 2020 to 2022 in the Global Finance World’s Best Banks Awards and Best Commercial Bank, Nigeria for three consecutive years from 2021 to 2023 in the World Finance Banking Awards.

Additionally, Zenith Bank has been acknowledged as the Best Corporate Governance Bank, Nigeria, in the World Finance Corporate Governance Awards for 2022 and 2023, and ‘Best in Corporate Governance’ Financial Services’ Africa for four consecutive years from 2020 to 2023 by the Ethical Boardroom.

The Bank’s commitment to excellence saw it being named the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands for 2020 and 2021, and Retail Bank of the Year for three consecutive years from 2020 to 2022 at the BusinessDay Banks and Other Financial Institutions (BAFI) Awards.

The Bank also received the accolades of Most Sustainable Bank, Nigeria, in the International Banker 2023 Banking Awards, Best Commercial Bank, Nigeria and Best Innovation in Retail Banking, Nigeria, in the International Banker 2022 Banking Awards.

Zenith Bank was named Bank of the Decade (People’s Choice) at the ThisDay Awards 2020, Bank of the Year 2021 by Champion Newspaper, Bank of the Year 2022 by New Telegraph Newspaper, and Most Responsible Organisation in Africa 2021 by SERAS Awards.

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