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Investors should ignore the recent cacophonous noise about the boardroom politics in the corporate world of First Bank of Nigeria and Geregu Power as data shows Billionaire investor Femi Otedola era has ushered in value creation for all shareholders of the firms.
No man has changed the fortune of businesses and shareholder’s as Chairman Femi Otedola whose investment acumen combined with proactive thinking with a spice of indefatigable mindset has been famed across the globe.
Otedola’s ability to deliver higher returns in the form of share appreciation and bumper dividend to investors is a specimen for students of finance to study.
It is not grandiose to refer to him as the man with the magic fingers as whatever he touches turns to gold. After all, nothing tarnishes a hero as much as failure. Otedola has never failed as he puts his mouth where his money is.
For First Bank the subsidiary of FBN Holdings, the results of high loan pricing, an expansion in earning assets, and adoption of digitalisation and diversified service and restored public confidence are truly spectacular.
Nothing could be more extraordinary than the restoration of prosperity caused by the foundation laid by Chairman Femi Otedola.
When Otedola acquired a 5.07 percent equity stake in FBN Holdings Plc to become a majority shareholder in October 2021, the lender’s market price was N11 (market capitalization of N393.35 billion). Today, its share price has skyrocketed to N31 or a market value of N1.11 trillion (January, 10, 2025).
It is important to note that the billionaire investor had consolidated his stake by buying an additional share of 797,946,415 through the Nigerian Exchange Limited, NGX, to sustain his majority stake in the company in June 2024, to become the undisputed Chairman of the company.
“We have confidence in Femi Otedola as is making money for shareholders while ensuring international best practice,” said a shareholder who doesn’t want his name mentioned.
“Hitherto, the bank has been managing badly with worrisomely high loans, but today, the balance sheet is looking healthier,” said the investor.
The Bank had total assets of N27.43 trillion as at September 2024, that compares with N7.89 trillion as at December 2020.
The N533.87 billion profit the Bank generated in the first nine months of 2024 is equal to the combined internally generated revenue (IGR) of Federal Capital Territory (FCT), Rivers, and Ogun State.
The Bank took part of its profit and invested in technology as it now has 23 million users across all digital platforms, as the value of transaction processed hit N46 trillion in the first nine months of 2024.
Under Chair Femi Otedola, there has been an improvement in asset quality as non-performing loans (NPLs) of 4.70 percent is lower than the 5.0 percent regulatory threshold.
And the billionaire investor is not resting on his oars as First Bank has received an order of mareva injunction issued against the assets of General Hydrocarbons Limited and Nduka Obaigbena, the Publisher of This Day newspaper for a total claim of two hundred and twenty-five million, eight hundred and two thousand, three hundred and seventy-five dollars ($225,802,379.69).
It is fitting to say that Nigeria needs an ingenious man like Chairman Otedola to grow its economy, after all, America will not have been the richest country in the world without the inputs of the likes of Mr. JP Morgan, the founder of the largest lender in the world, JP Morgan Chase.
Geregu Stock has risen 851.12% since 2021` under Femi Otedola’s leadership
Since October 5, 2022, Geregu Power’s market capitalisation has risen to N2.87 trillion from N302.25 billion on October 5, 2021, which is a 851.12 percent increase, according to data gathered by MoneyCentral.
The impressive share appreciation is attributed to the chairman of the company Femi Otedola who took the firm public in 2022 to become the first power company to be listed on the mainboard of the Nigerian Exchange. Group (NGX)
The company’s share price jumped to N1150 as at January 10, 2025 from N120.90 on October 5, 2022.
Geregu Power had a year to date gain of (YTD) of 188.13 percent in 2024, outperforming the NGXASI index of 37.65 percent.
The Power firm’s revenue surged 109.97 percent to N112.58 billion in September 2024 from N55.74 billion as at September 2022.
Profit followed the same growth trajectory as it spiked by 113.03 percent to N24.18 billion from to N11.35 billion as at September 2023.
The company’s balance sheet is looking better even amid tightening financial conditions and rising interest rates which has bloated borrowing costs to the detriment of the economy.
For instance, the median interest coverage ratio for Geregu Power stood at 5.04 at September 2024, substantially higher than 2023’s of 6.1, according to data from MoneyCentral.
The figure is a measure of a company’s ability to repay its debts, with a ratio of at least 2 generally considered the minimum acceptable amount for a company with solid revenues. Analysts typically prefer a coverage ratio of 3 or higher.
The management of Geregu Power is committed to Nigeria’s power sector as it has made an investment of $550 million in plant transformation.
“From the beginning, we invested 100 million Euro to bring the capacity to 435 MW after the purchasing of the plant,” said Doron Grupper, Independent Non-Executive Director of Geregu Power.
“Right now, we have invested another 100 million Euro to bring us to 200 Million Euro and including the purchasing altogether, we have invested 430 Million Euro.“Now, we are planning to invest much more because we hope to increase the capacity of the power station to 1300 MW once the issue with the federal government is resolved,” said Grupper.
First Bank Value Destruction Was Almost Complete, Then Otedola Saved It
On March 08 2017, FBN Holdings (the parent company of First Bank) closed trading at N2.96 per share. A decade earlier in 2007 First Bank had raised N250 billion in a public offering at N33 per share.
The shares eventually rose to more than N50 per share on the Nigerian Stock Exchange between the 2007 offer and the market crash of 2008, trapping many retail investors underwater for the next decade.
Even with the stock essentially crashing by 91% between the rights offer of 2007 and lows of 2017 and destroying shareholder value, there were few investors willing to call a bottom and buy the stock due to corporate governance issues and huge non-performing loans.
“Yes I remember First Bank (FBNH) trading at around N3/share some years ago but nobody wanted to touch it,” Maxwell Adeniyi, a retail investor told MoneyCentral.
“The feeling was that the stock was going to zero. Nobody foresaw the intervention by the Chairman Femi Otedola, which has changed the fortunes of the bank.”
“The feeling was that the stock was going to zero. Nobody foresaw the intervention by the Chairman Femi Otedola, which has changed the fortunes of the bank.”
In 2021 Billionaire activist investor Femi Otedola began quietly accumulating shares of FBN Holdings until he took a controlling stake in the bank holding company.
“We reckon he built his stake through a number of vehicles, including custody accounts,” a source speaking to MoneyCentral said.
What this invariably meant was that being the largest shareholder, Otedola held the highest voting shares and began to dictate the direction of the bank through his voting power.
In 2024, Otedola emerged the Chairman Board of Directors of FBN Holdings according to a corporate filing on the Nigerian Exchange Limited (NGX). The appointment came two years after he became the firm’s single largest shareholder in December 2021, when he increased his stake to 7.57 percent.
“He is a visionary entrepreneur with a track record of pioneering businesses, growing and transforming corporations,” the financial institution said.
Lax Corporate Governance and financial shenanigans at FBNH Pre Otedola
The previous Chairman of First Bank, Ibukun Awosika and Obafemi Otudeko, the chairman of FBN Holdings were both removed from their positions by the Central Bank of Nigeria (CBN) in April 2021.
The CBN in a letter to the former Chairman of the Bank dated April 26th, 2021, said the bank had not complied with regulatory directives to divest its interest in HoneyWell Flour Mills despite several reminders.
The bank had also not perfected its lien on the shares of Oba Otudeko in FBN Holdco which collaterised the restructured credit facilities for HoneyWell Flour Mills contrary to conditions precedent for the restructuring of the company’s credit facility.
Insider related loans in First Bank have been problematic in recent years, according to the Central Bank of Nigeria (CBN).
The insiders of First Bank of Nigeria who took loans in the bank with controlling interest on the board of Directors, failed to adhere to the terms of restructuring of their credit facilities, which contributed to the poor financial state of the bank, the CBN said in a press briefing in April 2021 following the sacking of the board of the bank.
“The CBNs recent target examination as at December 31st 2020 revealed that insider loans were materially non-compliant with terms of restructure of the loans,” the CBN said.
“For example non perfection on liens on shares and collateral arrangements that CBN had insisted on for over 3 years, despite several regulatory reminders.”
FBNH Holdings Asset quality was a key concern for investors during the Otudeko era, with the Bank’s gross nonperforming loan (NPL) ratio escalating to 24.4% at Full Year (FY) 2016, 22.8% in FY 2017, and 24.7% in FY 2018.
This was largely driven by rising delinquent loans, particularly within the troubled oil and gas sector, where the Bank was highly exposed.
NPL ratios have now fallen below the 5% CBN threshold as at FY 2023 under Otedola’s leadership.
FBNH profitability rises sharply between 2021 – 2024
FBN Holdings has seen a stunning reversal in its fortunes over the past 2 years. Profitability has surged while return on equity (ROE) has risen to more a respectable level as at December 2023, to the delight of investors.
Return on equity (ROE) measures how efficient a corporation is at generating profit from money that investors have put into the business. FBN Holdings return on equity has surged tenfold from an embarrassing 2.1% in 2016 to 21.9% in 2023. (see chart).
First Bank of Nigeria had been under regulatory forbearance between 2016 and 2020, according to the CBN.
Forbearance is a regulatory policy implemented by central banks and other regulatory authorities, that permits banks and financial institutions to continue operating even when their capital is fully depleted.
The Central Bank of Nigeria (CBN) conducted targeted examinations and stress tests on FBNH in 2016, revealing that the bank was in grave financial condition.
First Bank’s capital adequacy ratio and non-performing loan ratios were then found to be substantially breaching acceptable financial and regulatory standards, according to the CBN.
“The problems at the bank were attributed to bad credit decisions, significant and non-performing insider loans, and poor corporate Governance practices. The shareholders of the Bank and FBN Holdings lacked the capacity to recapitalize the bank to minimal requirements,” the CBN said in 2021.
Shareholders interests finally align with ownership of FBNH
Sources tell MoneyCentral that one of the most perplexing thing about FBN Holdings was how poorly it had been run, until now.
“This was supposed to be the largest bank in the country by far in terms of its earnings generation capacity, but it was so badly run in the past,” a chief investment officer at a major Pensions Fund told MoneyCentral.
Under Otudeko, the capital market’s confidence in FBN Holdings slumped significantly, with the firm’s share depreciating by 61.06% between 2013, a year after he was appointed FBN Holdings board chairman, to 2021, when he exited.
This wiped off N405.97 billion in the market valuation of the company, leading to significant loss in shareholders’ investments, as FBN Holdings market capitalisation fell to N258.80 billion, from N664.78 billion.
In 2024, FBNH shares were up 19 percent and closed trading on Friday at N30 per share, for a market capitalisation of N1.08 trillion.
Other analysts tell MoneyCentral that leadership is vital, and both institutional and retail shareholders should be vigilant to avoid a return to the past, when insiders used the Bank Holding Company (FBNH) as their personal piggy-bank.
“Otedola had a plan of becoming not just a significant shareholder, rather he wanted to be the single largest shareholder, with the prominence and statutory capacity to have influence, especially from a governance perspective,” a market analyst told MoneyCentral.
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