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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.”
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 (see chart above).
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 – 2023
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.
FBN Holdings Plc reported record full-year 2023 profit and revenue that whet investors’ appetite for more dividend as the lender benefited from improvement on yields on securities and loan expansion.
The strong performance across each of the segments comes as a weak Naira continues to undermine businesses and magnify hardship among Nigerians.
The bank saw profit surge by 127.42 percent to N309.88 billion.
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.
Investors and shareholders today are however seeing much higher total returns with stellar capital gains and dividends under Otedola’s leadership. FBN Holdings stock increased by 116% in 2023 (see first chart), while dividends have been on an uptrend since 2021.
In 2024, FBNH shares are up 14.65 percent and closed trading at N27 per share on Friday for a market capitalisation of N969.17 billion.
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.
The leadership question is already being answered as FBN Holdings recently appointed three new directors for the HoldCo and two more for the Bank marking the beginning of billionaire investor, Femi Otedola’s, tenure as Chairman of the holding company.
The directors appointed by the bank points to a strategic thrust for better oversight, risk management, and corporate governance, aiming to enhance the bank’s operational resilience and strategic agility.
The holding company announced the appointment of Mr. Olusola Adeeyo, and Mr. Viswanathan Shankar as Non-Executive Directors of FBN Holdings Plc respectively.
The bank (a subsidiary of the HoldCo) also appointed Mrs. Remilekun Adetola Odunlami as Non-Executive Director and Mr. Anil Dua and Mrs Fatima Ibrahim Ali as Independent Non-Executive Directors of FirstBank.
“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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