EXCITEMENT IN SHAREHOLDERS’ CAMP AS FIRSTBANK SHEDS NPL BURDEN
Olushola Okunlade Writes
With a significant cut in its impairment charges (which translates into a clean loan book) in its first quarter (1Q), 2022 results, after it successfully brought down its non-performing loan to 6.1 per cent in 2021 full year performance, analysts say the repeat of the impressive performance of FirstBank in the first quarter did not only show the consistency in its rebound but that it demonstrated the fact that the recovery is real.
For the shareholders of the Nigerian banking behemoth, First Bank of Nigeria Limited, it is a season of celebration and a period to shower praises on the board and management of the bank for successfully working its way back into the reckoning, after a long period of operational challenges mostly blamed on rising cases of non-performing loans.
The shareholders, who joined other stakeholders of the bank and its parent company, FBN Holdings Plc., in appraising its first-quarter 2022 results made public last week, said it is a great relief that the organisation has put the issue of non-performing loans behind it.
According to them, the outstanding results for the bank’s full-year 2021 is an appetizer to the first-quarter 2022 results and that the repeat of impressive results for the first quarter did not only show the consistency of its restructuring but that it demonstrated the fact that the recovery is real.
SHAREHOLDERS’ ENDORSEMENT
The founder and pioneer National Coordinator, Independent Shareholders Association, Sunny Nwosu, in an interview with THISDAY, at the weekend, said the management of FirstBank deserves praise for working the bank back to profitability and clean loan book.
He believes the ability of the FBNHoldings, the parent company, to significantly cut the exposure to non-performing loans to 6.1 percent showed that the bank has shut the door against future delinquent debtors, a development he said will consolidate the bank.
Nwosu said many of the shareholders were pleasantly surprised first, by the performance in the 2021 full results, saying the first quarter 2022 results came as a confirmation of the readiness of the bank to take its leadership position in the nation’s banking industry.
“Considering all the provisions they had made in the past two years and for them to have come out clean shows it is not a bad result and for them to have agreed to pay 35 kobo dividend to shareholders, it is encouraging because most shareholders did not know the company was going to pay anything, especially with all the challenges going on in the economy.
“We are indeed excited that they have been able to bring down non-performing loans, which means they will have more money to do business with and I’m quite sure they will be more careful this time when it comes to giving out loans,” Nwosu stated.
He maintained that FirstBank can still return to the leadership position in the Nigerian banking industry, saying the current leadership should keep an eye on the business and encourage the staff with a good incentive to compete in the industry.
1Q 2022 RESULTS
Analysts said the bank has remained dazzling in virtually all its performance metrics, a development they attributed to the NPL improvements which restored investors’ confidence. And success with NPL means the quality of assets is bound to rise.
An analysis of the bank performance gleaned from the group Q1, 2022 results showed that its exposure to bad loans has substantially reduced given the fact that the amount set aside as impairment charges has come down from N13.175 billion in the first quarter of 2021 to N8.75billion in 1Q 2022.
In the period under review, First Bank of Nigeria Limited recorded gross earnings of N170.4 billion, up by 33 per cent as against N128.1billion in the previous year.
The bank’s net interest income was put at N72.9 billion, a 42.1 per cent from N51.3 billion generated in the same period of 2021, while non-interest income was N58.8 billion, up by 21.7 per cent from the 2021 figure.
Profit After Tax for the first quarter of 2022 was N31billion, whereas N16.3 billion was the figure declared for 1Q, 2021. The bank declared total assets of N8.8 trillion, a 3.5 per cent rise from N8.5 trillion in the preceding year.
To show the bank was in a serious business of lending, its customers’ loans and advances (net) totaled N2.999 trillion, up by 5.8 per cent, year-to-date as of December 2021, which was put at N2.835 trillion, while customers’ deposits were N5.9 trillion, as against N5.6 trillion in the first quarter of 2021, a 5.4 per cent increase.
BUILDING CONFIDENCE IN OPERATION
Analysts believed the recent turnaround and improvement in the Non-performing loans of First Bank of Nigeria Limited (FirstBank) have been a major boost in the bank’s quest to reinforce its leadership in the financial services industry in Nigeria.
Dr. Adesola Adeduntan, Chief Executive Officer (CEO) FirstBank Limited.
For instance, it has been observed that the current leadership of its Chief Executive Officer, Dr. Adesola Adeduntan has been instrumental in building stakeholders’ confidence and trust in the bank’s financial viability with analysts left to ponder and perhaps, understudy the pace of such feat has been achieved. They said answers to these have been provided by the bank’s consistent improvements in its Non-performing Loans (NPL) ratio and position.
For instance, by June 2020, when improvements were noted in the bank’s NPL ratio, the NPL ratio stood at 8.8 per cent. By March 2021, this figure had impressively dwindled to 7.9 per cent, and going by the 2021 results, the figure only stood at 6.1 per cent.
Non-performing loans, or ‘NPLs’, are bank loans that are subject to late repayment or are unlikely to be repaid by the borrower. The inability of borrowers to pay back their loans was aggravated during the financial crisis and the subsequent recessions.
For a bank that was almost brought to its knees by the burden of non-performing loans, it came as a great relief to both the shareholders and the regulatory authorities that for the first time in a long while, FirstBank’s NPLs came down to 6.1 per cent, a significant progress for the bank when compared to other Tier 1 banks and the regulatory threshold of 5.0 per cent.
Analysts also attributed the significant fall in the NPL rates from 40 in 2016 to 6.5 per cent in 2021, to a new culture of corporate governance currently in place in the group and which has successfully revamped the company’s risk management capabilities.
According to the bank, the recent turnaround and improvement in the non-performing loans have been a major boost in FirstBank’s quest to improve profitability and reinforce its leadership in the financial services industry in Nigeria.
Analysts said with the impressive results for its 2021 operations, the board and management of FBN have proven to the investing community that the company is ready to take its leadership role in the nation’s banking sector and that the years of locusts have been put behind the institution.
MAINTAINING FAIRLY MANAGEABLE NPL RATIO
For a sector already under pressure as a result of a sluggish economy, a challenging operating environment, and increased competitive intensity, the year 2022 came with a lot of fears for the Nigerian banking industry.
As economic realities dawned on Nigerians, especially in a pre-election year, many investors struggled to get decently priced loans in Nigerian banks, and their plight is not helped when a bank is risk-averse because it already has lots of bad loans on its books.
It is interesting to note that amidst the huge pressure placed on Nigerian banks by the prevailing sluggish economy, what the management of FirstBank did was diversify its loan books and maintained a fairly manageable Non-Performing Loan (NPL) ratio.
This is because the percentage of non-performing loans in Nigeria reflects the health of the banking system. A higher percentage of such loans shows that banks have difficulty collecting interest and principal on their credits. That may lead to less profits for the banks in Nigeria and, possibly, bank closures.
FirstBank recorded the highest NPL ratio in four years with 24.7 per cent in 2018 which dropped to 9.9 per cent, 7.7 per cent, 7.2 per cent in the period of 2019, 2020, and 6.1 per cent in the 2021 full-year results.
ADEDUNTAN: ‘WE ARE READY TO IMPROVE BOTTOM LINE PERFORMANCE’
Chief Executive Officer of FirstBank Group, Dr. Adesola Adeduntan, who expressed the determination of the bank to aim higher said, “At FirstBank, we have historically been interwoven with the fabric of this nation with a full-service commercial banking offering catering to every segment of the economy.
“We believe we are now in a good position to translate this unique revenue-generating potential into improved bottom-line performance.
“Our first-quarter results demonstrate that we have commenced our journey of Quantum Profitability Leap in earnest with profit before tax doubling to N34.1 billion as the Bank begins to reap the dividends of the successful restructuring of its balance sheet, revamped risk management, robust technology, and innovative service offerings.
“Our gross earnings are also up 33.0 per cent YoY to N170.4bn and Net Interest Income up 42.1 per cent YoY to N72.9bn. Furthermore, our strengthened risk management capabilities equip us with the ability to mitigate any negative effects of headwinds that may materialize given current macroeconomic pressures.
“Looking ahead, we will continue to maximize all opportunities presented by our large network, and support our customers with innovative value-adding solutions through these uncertain times while investing in strengthening our digital banking offerings to deliver a better customer experience.”
Fidelity Bank’s upcoming trade expo tagged, the Fidelity International Trade and Creative Connect (FITCC Houston), has received a major boost as the Mayor, City of Houston, Sylvester Turner, has termed it, “A catalyst to support bilateral trade between Nigeria and Houston; and an opportunity for the Houston community and the diaspora to explore emerging trends, forge new partnerships and unlock new possibilities”.
This was made known in a video message recently issued by the mayor. In the one-minute clip obtained by our journalist, Mayor Turner highlighted the several side attractions scheduled for FITCC Houston and encouraged businesses to take advantage of the expo to expand their businesses beyond borders.
The event is scheduled for Tuesday, 24, and Wednesday, 25th October 2023 at the George R. Brown Convention Center, 1001 Avenida de las Americas, Houston, Texas 77010. The bank will be hosting exporters, leading businesses, entrepreneurs, investors, and regulators operating in the commodity, service, creative, fashion, and FinTech sectors in Nigeria and the United States with the view of promoting Nigeria’s non-oil exports and facilitating integrations to global supply-chain networks.
Mr Olaniyi Toluwalope, Managing Director and Chief Executive Officer, eTranzact International PLC, has bagged Business Day’s Top 25 CEOs award in recognition of his company’s stellar performance on the Nigerian Stock Exchange.
Speaking during the award ceremony last weekend in Lagos, the publisher, Business Day Media Ltd., Mr. Frank Aigbogun stated that the award is more than just a recognition ceremony, but a reward for excellence, innovation, and drive for positive change.
According to the publisher, the eTranzact boss and other awardees have demonstrated extraordinary leadership, resilience and relentless pursuit of a result of success and this remarkable achievement in growing market value within the period of review stands them out as industry leaders, serving as a beacon of inspiration, admiration and respect from their peers and stakeholders alike.
“This has made us gather to celebrate your achievements, passion, and your dedication to excellence. As we recognize the countless hours of hard work, sleepless nights, and sacrifices that go into building and leading a successful business, your resilience in the face of challenges is truly commendable and it is an honour to acknowledge and celebrate your triumphs,” he concluded.
Responding after the award, Mr Olaniyi Toluwalope said the award is a testament to what they have been doing in the financial technology sector within the past 20 years.
Left-Right: Mr. Frank Aigbogun, Publisher BusinessDay presenting Mr Olaniyi Toluwalope : MD/CEO, eTranzact Plc the award recognition of the company’s stellar performance on the Nigerian Stock Exchange during the Top 25 CEOs Award in Lagos.etra
Toluwalope said: “This award means a lot to us since we began the journey of transformation as an organisation a couple of years ago.”He believed the board, the management, and the entire team have worked very hard to reimagine strategy, focusing extensively on execution capability. “We have built more partnerships, deepened our collaboration with the government, private sector, with lots of our financial service partners. The quality of products and solutions we offer coupled with the investment we have made in technology infrastructure is the outcome of all we are seeing now in terms of our improvement and top performance.”
“As one of the top fintech companies in the country, having been around for over 20 years, doing great things and setting new standards and creating pioneer products and solutions, these are the things that have created the pillars which we stand on today, which is what is creating this visibility and identification we are seeing and benefiting from,” he said. It is worth noting that, eTranzact under the leadership of Mr. Toluwalope recorded the highest-ever profitability in the 20-year history of the company in its 2022 financial year.
The company is already on the upward trajectory to build on the gains of the performance by continually providing world-class solutions and products to its discerning clients which cuts across both public and private sectors.
Nnamdi Okonkwo, Group Managing Director of FBN Holdings Plc, has bagged outstanding CEO in the just concluded Top 25 CEOs Awards organized by BusinessDay that was held at the Ballroom of the Federal Palace Hotel, Victoria Island, Lagos last Saturday.
Left-Right: Adewale Arogundade, Acting Company Secretary, FBNHoldings, Tolu Oluwole, Head, Investor Relations, FBNHoldings, Nweke (Junior), former Director General, Nigerian Economic Summit Group, Oyewale Ariyibi, Executive Director, Finance FBNHoldings, Frank Aigbogun, Publisher, BusinessDay, and Wasiu Shafe, Financial Controller, FBNHoldings.
In this year’s edition of the BusinessDay Top 25 CEOs, the publication recognised 25 Chief Executive Officers and Managing Directors of various listed firms on the Nigerian Stock Exchange (NGX) who experienced outstanding financial development and also made important contributions to their respective industries.
FBNHoldings team that graced the event are Adewale Arogundade, Acting Company Secretary, FBNHoldings, Tolu Oluwole, Head, Investor Relations, FBNHoldings, Nweke (Junior), former Director General, Nigerian Economic Summit Group, Oyewale Ariyibi, Executive Director, Finance FBNHoldings, Frank Aigbogun, Publisher, BusinessDay, and Wasiu Shafe, Financial Controller, FBNHoldings.