Posted by News Express | 5 May 2021 | 1,352 times
Last week was one of twists and turns for First Bank of Nigeria Limited, the nation’s oldest banking institution. It was a week that saw the bank’s MD sacked and reinstated, as major shareholders struggled for control of the financial powerhouse. SULAIMON OLANREWAJU reports.
It was meant to be a master stroke that would secure the bank permanently under their armpit, boost their ego and keep their antagonists at bay, but the sacking of Dr Adesola Adeduntan, First Bank Managing Director, by the bank’s board members, turned out to be their undoing as they underestimated the capacity and resolve of those they were dealing with.
The attempt to remove Adeduntan earned them a sack from the Central Bank of Nigeria (CBN) as the board was dissolved, while Adeduntan was reinstated. The drama started the day after the Annual General Meeting (AGM) of its holding company, FBN Holdings Plc, on Tuesday April 27. At the AGM, First Bank, the commercial banking arm of the Group, headed by Dr Adeduntan, posted gross earnings of ₦539.0billion, total assets of ₦7.4trillion and profit after tax of ₦67.8billion. The performance was considered good enough by the shareholders because the arm made significant contribution to the fortunes of the Group.
But the day after the AGM, the bank’s board of directors held a meeting where a decision was taken to ask the MD to leave the bank, eight months ahead of the expiration of his tenure. In a statement issued on Wednesday, April 28, Mrs Ibukun Awosika, erstwhile chairman of the bank, announced the retirement of Adeduntan and announced Gbenga Shobo, the Deputy Managing Director, as his replacement.
But the buildup to the AGM probably set the stage for what would later unfold. After receiving FBN Holding Plc’s Audited IFRS Accounts for the Financial Year Ended December 31, 2020, the CBN, in a letter dated April 26, 2021, and addressed to the chairman of First Bank of Nigeria Ltd, expressed concern that the bank had not complied with regulatory directives to divest its interest in Honeywell Flour Mills Plc despite several reminders.
The letter, titled Re: Audited FIRS Accounts for the Financial Year Ended December 31, 2020, signed by Haruna B. Mustafa, Director of Banking Supervision, stated, “We further noted that after four years the bank is yet to perfect its lien on the shares of Mr Oba Otudeko in FBN Holdco, which collateralised the restructured credit facilities for Honey Well Flour Mills contrary to the conditions precedent for the restructuring of the company’s credit facility.
“Given the bank’s failure to perfect the pledge and satisfy conditions for regulatory approval, the restructuring has thus been invalidated and the credit facilities now payable immediately.
“Consequently, the central bank has requested that Honeywell fully repays its obligations to the bank within 48 hours failing which the CBN will take appropriate regulatory measures against the insider borrower and the bank.”
The statement added: “Furthermore, the Bank (CBN) notes the untenable delay in resolving the long outstanding divestment from Bharti Airtel Nigeria Ltd in line with extant regulations of the CBN.
“Accordingly, you are required to divest the equity investments in all non-permissible entities such as Honeywell Flour Mills and Bharti Airtel Nigeria Limited within 90 days. Please you are to forward evidence of compliance in accordance with the timelines above to the Director of Banking Supervision.”
According to those in the know, it was this letter delivered on the eve of the AGM that allegedly precipitated the decision of some members of the board to sack Adeduntan. The First Bank MD/CEO was said to have always insisted on playing by the rules.
It was also alleged that the only option opened to some board members to slow down the apex bank from “taking appropriate regulatory measures” against him if Honeywell did not “fully repay its obligations to the bank within 48 hours” was to impress it upon the Managing Director to stall the process of responding to the bank’s query.
Knowing that Adeduntan might not readily agree to that, the plan to kick him out was perfected. The board members, relying on the power of the board to hire and fire a managing director, saw the removal of Adeduntan as a done deal and went ahead to announce his sack and replacement.
Even when the CBN Governor, on hearing about the plan to remove Adeduntan before it went public, intervened to stop the move, his plea was ignored because the board members believed they had the power to determine the fate of the bank MD.
But in a swift reaction the same day the announcement was made, the CBN queried Mrs Awosika, asking her to explain why disciplinary action should not be taken against the board for “hastily removing the MD/CEO and failing to give prior notice to the CBN before announcing the management change in the media.”
The CBN, in the letter signed by Mr Haruna Mustafa, Director of Banking Supervision, said there seemed to be no justification for Adeduntan’s removal, since it was not aware of any report indicting him of any wrongdoing or misconduct. CBN said, “We are particularly concerned because the action is coming at a time the CBN has provided various regulatory forbearances and liquidity support to reposition the bank which has enhanced its asset quality, capital adequacy and liquidity ratios amongst other prudential indicators.”
The letter further reads, “In the meantime, you are directed to desist forthwith from making any further public/media comments on the matter. Your comprehensive response on the foregoing should reach the Director, Banking Supervision Department, on or before 5p.m. on April 29, 2021.”
While it is not clear whether the board responded to the query before the stated deadline, the CBN Governor, Godwin Emefiele, in the evening of Thursday, April 29, announced the dissolution and reconstitution of the boards of both First Bank Limited and FBN Holding Plc, and reinstated Adeduntan, while Shobo was asked to revert to his former position as Deputy Managing Director.
While addressing the media on why the CBN had to intervene in the First Bank situation, Godwin Emefiele, the governor, acknowledged the powers of the board to appoint or remove the managing director.
He, however, added that with the substantial stake of CBN in the bank, the regulator should have been taken along when such decision was being considered.
According to him, First Bank had maintained healthy operations until 2016 financial year when the CBN’s target examination revealed that it was in grave financial condition with its Capital Adequacy Ratio (CAR) and Non-Performing Loans ratio (NPL) substantially breaching acceptable prudential standards.
He said, “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 Holding Plc also lacked the capacity to recapitalize the bank to minimum requirements. This conclusion arose from various entreaties by the CBN to them to recapitalize.”
He added that to save the bank, the CBN had to “Grant regulatory forbearances to enable the bank work out its nonperforming loans through provision for write off of at least N150bn from its earning for four consecutive years.”
CBN also granted concession to insider borrowers to restructure their nonperforming credit facilities under very stringent conditions. The apex bank also embarked on “Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.”
Emefiele also said, “The measures had yielded the expected results as the financial condition of FBN improved progressively between 2016 when the forbearance was initially granted to the current financial year.”
The CBN Governor added that based on the regulatory forbearance and intervention of CBN since 2016, “It was therefore surprising for the CBN to learn through media reports that the board of directors of FBN, a systemically important bank under regulatory forbearance regime had effected sweeping changes in executive management without engagement and/or prior notice to the regulatory authorities.
“The action by the board of FBN sends a negative signal to the market on the stability of leadership on the board and management and it is in light of the foregoing that the CBN queried the board of directors on the unfortunate developments at the bank.”
Emefiele stated further, “By our last assessment, FBN has over 31 million customers with deposit base of N4.2 trillion, shareholders funds of N618 billion and NIBSS instant payment (NIP) processing capacity of 22 percent of the industry. “To us at the CBN, not only is it imperative to protect the minority shareholders, that have no voice to air their views, also important, is the protection of the over 31 million customers of the bank who see FBN as a safe haven for their hard-earned savings.”
With that, the fate of the sacked board members was sealed. The unseen hand On the surface, the intervention of the apex bank might have the look of a move to rescue a “systemically important bank” and save both shareholders’ investments and depositors’ funds, but it was more than that. Behind the scene there were speculations of need to settle scores between the feuding camps of the bank’s major shareholders.
According to informed sources, both Otudeko and Adenuga had been close and chummy until recently. Apart from both being of the Ijebu stock, they grew up in Ibadan and had a mutual friend in the late Aare Musulumi of Yorubaland, Alhaji Azeez Arisekola Alao, who was also a major First Bank shareholder. Otudeko was a regular visitor at Mike Adenuga Towers, where the Globacom helmsman was always on hand to receive him at the elevator. That was then.
According to one of the sources that confided in the Nigerian Tribune, Adenuga had indicated interest in acquiring more First Bank shares a few years ago and had run this by Otudeko. There were some agreements and, later, there were disappointments, Adenuga, who currently owns 6 per cent of the bank, felt let down. The recent development in the bank provided a veritable opportunity for Adenuga to strike back, as he deployed his massive contacts and influence to tighten the noose from all angles. The rest is history. Remi Babalola, the new FBN Holdings chairman, is an ally of Alao-Arisekola. Adenuga was very close to Arisekola. So, it is a total change of baton on the boards of both the holding company and the commercial banking subsidiary. Those who have been kicked out are licking their wounds and musing over their loss, while the winners are popping champagne and back-slapping. Storm over? After the tumultuous week, all now appears calm at the Marina Head Office of First Bank. The bank on Friday issued a statement expressing its readiness to comply with the apex bank’s regulator’s directive. Both Adeduntan and Shobo have also reverted to their pre-April 28, 2021 positions.
Similarly, while reacting to her removal from the board of the bank on her Instagram page last Friday, Mrs Awosika wrote that she had always acted in honour and integrity with the utmost interest of the institution, all stakeholders and the nation. She added that the board acted in what it clearly believed to be in the best interest of the bank. Giving an insight into her journey in the bank, Awosika said that she was appointed to the board of First Bank of Nigeria in October 2010.
She continued, “A few months later, I was appointed to chair the board of its startup FBN Life Insurance Limited (a joint venture with Sanlam of South Africa). As its pioneer Chairman, I had the privilege of working with a strong management team led by Val Ojumah. “Together with the rest of our team, we built a company that became profitable in twenty-four months and continues to be so.
“In early 2013, I was moved from FBN Life Insurance Ltd, to assume the chairmanship of FBN Capital working with a brilliant team led by Kayode Akinkugbe as the Managing Director.
“We worked hard to build the institution, bought Kakawa Discount House which I was again asked by the Group to Chair. We eventually merged the companies to create the FBN quest Merchant Bank Group, which I chaired until my appointment as Chairman of First Bank of Nigeria on January 1st 2016.
“For over five years, I have worked with a dedicated team of board and management, with the support of Central Bank of Nigeria to rebuild and restructure the institution for its future. This included cleaning up non-performing loans, establishing good operational governance systems and processes, building controls and an effective and robust risk management system. “I am confident we have brought First Bank of Nigeria to a place where it is more than able to deliver utmost value to its stakeholders and the nation at large.”
With that statement, the former chairman appears to have left the issue of last week behind and moved on with her life. But is the storm over at Samuel Asabia House or is it the silence of the graveyard allowing the protagonists to restrategise ahead of another round of struggle? The answer is in the womb of time. (Nigerian Tribune)
· Governor, CBN, Godwin Emefiele, Chairman, FBN Holding PLC, Remi Babalola and CEO, First Bank PLC, Adesola Adeduntan
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