Business
Leadership And Firstbank’s successful transitioning 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.
Culled from Guardian Newspaper
RIGHT OF REPLY 2
PRESS STATEMENT FROM GENERAL HYDROCARBONS LIMITED
How First Bank’s Recklessness Almost Killed 93 Souls on Rig
It is not our intention to respond to every misinformation or inaccurate information put out by First Bank on the matter with GHL. We will respond to 3 points for clarity.
1.Diversion: First Bank keeps talking about diversion of funds by GHL without providing any evidence. Here are the facts. As we said before and will repeat now, all GHL contracts and invoices were vetted and paid by FBN through their Credit and Risk teams directly to ALL service providers. FBN’s repeated failures to pay on time within the contractual framework of 5 days which became up to 70 days or not at all, in a clear breach of its Tripartite Agreement obligations as captured below:The Bank shall, where GHL has satisfied all conditions precedent to disbursement under the Facility Agreement, disburse all of or part of the Facility Amount to GHL not later than 5 (five) Business Days aЯer GHL makes autilisation request in accordance with theterms of the Facility Agreement.This failure to pay GHL pending request as per above terms led to an international incident on October 7, 2023, when the drilling rig, Blackford Dolphin, ran out of fuel, food, water and other critical supplies with 93 souls on board, and the Rig was on the verge of declaring MAYDAY.The Managing Director and Executive Director of FBN were abroad and the current Managing Director, Olusegun Alebiousu, who was then the Chief Risk Officer (CRO), was acting for the Managing Director and GHL brought this matter to his urgent attention. He then worked the phone, calling Suppliers and Service Providers one after the other and promised payment within a 3 days. Based on FBN’s assurances, the Service Providers made emergency supplies, but the payment never came.To ensure safety of life and continuing security at 75KM Offshore Nigeria, GHL had to enter an Irrevocable Third-Party Payment Order with one of the Ofhakers to pay the suppliers directly, which stabilised the operation. FBN was later given evidence of the payments made.That is what FBN calls Diversion.We will meet FBN in court with Daily Reports and log details to debunk this continuing misinformation of diversion.GHL acted to save 93 souls, most of them foreign nationals, who had begun contacting their embassies and home governments, and to save Nigeria from an international incident offshore Nigeria.We are ready, willing and able to present the body of evidence to any court, including the continuing non-payment to Century FPSO and other service providers by FBN despite repeated demands in line with signed agreements.Indeed, we had to cough out our own cash as reflected in our audited financial statements to keep the project afloat or go to court to seek protective reliefs.
2. On abusing the Court process and failure to comply with a valid court order, FBN claimed they went to court on a different matter with regards to the Facility Agreement. But Justice Ambrose L. Allagoa, had given his judgement after hearing both sides on the Facility Agreement, amongst other issues on December 12, 2024. “That an order is granted, restraining the Respondent (FBN) either by itself, or acting through its servants, agents, assigns, privies, affiliates howsoever described, including any persons claiming under its authority from making any calls or demands, or taking any steps whatsoever to enforce any security, receivables, instrument, finance documents or assets of the Applicant (GHL) which have been charged as security for the facility agreements in respect of the Applicant’s operation of OML 120, including but not limited to the side letter, and the amended and restated agreements between the Applicant and the Respondent pending the hearing and determination of the arbitration proceedings between the Applicant and the Respondent brought pursuant to Clause 12(c) of the Agreement between the Applicant and the Respondent dated 29th May 2021.”FBN then went to Justice D Dipeolu of the same Federal High Court on December 30, 2024, with same lawyers, without disclosing this relevant judgment to the Learned Justice, to obtain a Mareva injunction Exparte freezing order against GHL and individual directors who never signed personal guarantees and thus not personally liable. Is this how a 130-year old blue chip financial institution committed to good governance and rule of law, should behave? Why the hurry to score cheap points to use on social media?If FBN was so sure of its facts why not put GHL on notice? Why an Exparte? We leave this to the Justices of the Federal High Court to decide on this matter and we will not make any further comment to avoid being subjudice.
3.Contrary to FBN’s claims, it sought to appoint an Independent Asset Manager to promote corporate governance. What it sought to do was to appoint a company that it can fire at any time to “take over GHL’s business, offices and operations within 90 days” of further disbursement. GHL refused and counter-offered a Joint Operating Committee with FBN and they refused, resulting in current impasse which they weaponised and made a public spectacle with their publication of their Exparte Mareva Freezing Orders. GHL had to stand its ground against such bullying.This 2nd Right of Reply has become necessary, again, in view of FBN’s continued misstatement but they have failed to debunk or deny the foundational material facts and seeking to eating their cake and having it. Luckily, FBN has not denied the Subrogation MOU and the benefits it got upfront from GHL’s intervention. They should meet their obligations and all will be well.
Thank you.
MANAGEMENT
…cements capital raise with full regulatory approval
Lagos, Nigeria: Sterling Financial Holdings Company PLC has achieved another
milestone with the approval of the Central Bank of Nigeria (CBN) recognising an
additional ₦75 billion in its capital raise.
This approval represents the final leg of the
capital injection that was achieved through a private placement in September 2024.
Building on the private placement’s success, Sterling launched a Rights Issue in October
2024, structured to provide existing shareholders the exclusive opportunity to deepen their stakes in the company and share in its growth story.
The Rights Issue received significant interest and participation, highlighting the confidence and trust the company has cultivated among its shareholders over the years. Regulatory approval for the process is currently underway, marking another significant step in the recapitalisation journey.
The public is eagerly awaiting Sterling’s Public Offer, which will present an exciting
opportunity for individuals to invest in the company. It is anticipated that the
recapitalisation process will be completed with a Public Offer early next year, allowing
wider participation from the public and further strengthening its commitment to shared value creation.
Group Chief Executive, Yemi Odubiyi described the capital injection and the approvalas a validation of the company’s strategic direction and operational excellence. “This milestone reflects the confidence of regulators and stakeholders in our vision to redefine financial services in Nigeria and beyond. Our enhanced capital base empowers us to pursue transformative opportunities, deliver sustainable value to all stakeholders and drive impact across critical sectors of the Nigerian economy,” he stated.
Odubiyi emphasised the company’s evolution from its origins as a merchant bank to its
current status as a diversified financial holdings company. Powered by cutting-edge
technology and a flexible operational model, the company has consistently demonstrated its ability to navigate market difficulties and seize growth opportunities.
Reflecting on Sterling’s accomplishments,
Odubiyi acknowledged the instrumental role
of stakeholders, including regulators, investors, and customers. “We are grateful for the unwavering support and trust in our strategy, which has been pivotal to our journey. This recapitalisation strengthens our ability to unlock new opportunities, create value, and drive economic growth,” he added.
The capital boost follows a year marked by robust financial performance and significant
strategic achievements for Sterling. As at the last week in December 2024, Sterling
witnessed a 19% surge in stock price, contributing to a remarkable three-year growth of 287.42%. In the first half of 2024, the company recorded a 51% increase in profit before tax compared to the same period in 2023 and achieved a 20% growth in total assets.
These results demonstrate Sterling’s resilience and ability to deliver superior outcomes despite the complexities of Nigeria’s economic landscape, marked by high inflation and currency volatility.
As Sterling looks ahead, its focus remains firmly on innovation, sustainability, and value
creation. With a fortified capital structure, the company is well-positioned to execute its
ambitious growth plans, deepen its impact across critical sectors, and set new
benchmarks for excellence in Nigeria’s financial services industry. This latest milestone marks a transformative chapter for Sterling Financial Holdings Company PLC as it
continues to redefine the future of financial services in Nigeria and beyond.
//
Interswitch, one of Africa’s leading integrated payments and digital commerce companies, has reaffirmed its commitment to driving innovation and empowering young talent in Nigeria by sponsoring the Financial Services Innovators (FSI) Intensive Software Testing Programme.The recently concluded intensive 8-week online programme, trained 100 university students, emerging innovators, and tech enthusiasts. Participants were equipped with critical software testing skills, preparing them to play pivotal roles in maintaining the quality and security of software products.The programme was implemented through the Fintech Development and Advocacy Initiative arm of FSI, a platform dedicated to facilitating financial services innovation in Nigeria. The Software Testing Programme aims to bridge the gap between academia and the financial services industry by offering hands-on, practical training tailored to market demands.Speaking on the partnership and success of the programme, Muyiwa Asagba, Managing Director, Digital Commerce and Merchant Acquiring (Interswitch Inclusio) said:”Innovation thrives when young minds are given the tools to succeed, and Interswitch is proud to sponsor this initiative, which aligns with our vision of nurturing a digitally inclusive future. By investing in these talents and providing them with practical, industry-relevant skills in software testing, we are not just enhancing the software testing ecosystem but also nurturing a generation of innovators who will shape the future of financial services in Nigeria and beyond. Initiatives like this reaffirm our commitment to promoting a digitally inclusive society while positioning Interswitch as a catalyst for innovation across Africa.”Participants gained practical expertise in software quality assurance, addressing critical industry needs while bolstering their readiness for Nigeria’s burgeoning technology landscape. A standout feature of the programme was the recognition of top-performing participants, five of whom secured internship opportunities, giving them invaluable real-world experience and a head start in their careers.Aituaz Kola-Oladejo, Executive Director, Financial Services Innovators, highlighted the programme’s transformation impact. She said:“We are thrilled to announce the successful completion of our 8-week Fundamentals of Software Testing course, which empowered 100 youths, 90% of whom are students in tertiary institutions. This training underscores our unwavering commitment to youth empowerment through education and skills development. Our goal is to equip young people with the knowledge and tools they need to thrive in future technology-driven careers, enhancing their employability and positioning them as globally competitive professionals. We extend our heartfelt gratitude to Interswitch for sponsoring this 3rd Cohort. Their support reflects a strong commitment to advancing technology ecosystem initiatives that drive national progress and innovation.”By championing initiatives like the Intensive Software Testing Programme, Interswitch reinforces its position as a leader in driving technological advancement and empowering the next generation of African innovators. This collaboration not only strengthens the company’s reputation as a catalyst for innovation but also fosters goodwill and loyalty within the tech ecosystem, paving the way for sustainable growth in Nigeria’s financial services landscape.
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