Olusegun Alebiosu takes over as the new CEO of FBN but the concern remains his capability to rewrite the rules of the game and ensure a seismic reverse from its current strategic drift for the bank to regain its industry leadership .
The appointment of Mr Olusegun Alebiosu as the new Chief Executive Officer ,CEO ,First Bank of Nigeria, to replace Mr Kazeem Adeduntan came as a rude shock to some individuals for one mushy headed and pathetic reason: the man he took over from still had few months to finish his tenure.
However, for those who had followed certain developments in the bank , particularly its tradition of poor corporate governance, in the last few years, it didn’t spring any surprise at all. Adeduntan was a man few powerful individuals wanted out of power by all means for a long time despite saving the bank from the mess he met on ground that nearly claimed its going concern.
As at the time of the appointment of Adeduntan in 2016 the bank had been turned a laggard. The failure of its senior management to write off its depreciating intellectual capital fast enough and its inabilty to create enough new one were some of the reasons responsible for that strategic position. Its uninspiring position as at that time could also be attributed to its past management excessive inclination to protect the past than to create the future , to take the industry structure as given and rarely to challenge the prevailing conventions .
But despite its unpleasant past ,some stakeholders seemed to have decided to put those lapses behind them for now . What now preoccupies their minds is the capability of the new man to drive the bank out of the treadmill and return the bank to its leadership position . The reason for priotizing their fears may not be far to seek . FBN has remained a typical case study of a dinosaur threatened by cataclysmic climatic changes that is now struggling to cope with a radically altered environment but not responding fast enough to the changing conditions. And up till now, it is much still at the mercy of environmental upheaval as tyrannosaurus rex . For its negligence and incapability, FBNH has become a victim of an obsolete profit engine and even its 2023 financial year results confirmed no respite yet . Moreover , the key issue is that the bank has lost its intellectual leadership to the younger banks .Sequel to this , the management team of FBN led by its new CEO must be fully conscious of its responsibility to develop industry foresight and understand that unless it first wins today’s battle for intellectual leadership, it will be unlikely to win tomorrow’s battle for market leadership .
2023 FY FIGURES TELL THE WHOLE STORY OF A CATCH-UP ENTITY.
The consequences of the above inadequacies have remained fatal to its competitiveness. A look into its latest financial statement confirms this view . Although to some optimists , FBNH is fast recovering and now on the lane fighting the leadership battle to upturn its past travails , but is it so ? .Not quite that .When one peeps into its operations it is starkly true that the bank is yet to gain the skills necessary to lend safely and profitably. Even when its peers exploited the loopholes in the economy which came in terms of increase in MPR and currency revaluation, the of FBNH’s leadership was so naive to key in .It recorded a whooping loss of N350billion .A comparative analysis of its performance relative to other Tier 1 banks confirmed this as much at the end of the 2023 financial year.
On the face value by its 2023 financial year results, FBNH did wonderfully with a jump in its profit after tax by 128 percent to hit N307billion from the previous year figure of N134.4b ; its gross earnings too hit the roof at N1.52 trillion .
The above supposedly impressive performance may not disputable particularly when those figures are compared to the last year’s results. But it becomes a mere ruse when compared to its peers particularly the best in class among them .
FBNH VS OTHER TIER 1 BANKS
Just as it happened to FBNH , a look into the books of all tier 1 banking industry players saw gross earnings and profitability climb to a record high, benefiting from MPR hikes and naira devaluation . But a laggard is always a laggard in the corporate world . FBNH was too weak to exploit those opportunities that delivered whooping revenues and profits to its competitors.
FBN Holdings Plc moved against the trend of monumental foreign exchange (FX) gains, particularly among banking majors with substantial offshore assets in 2023 and closed the year on the other side of a whooping net FX loss of over N350 billion. The final quarter delivered N253.7 billion of the net FX losses, swelling up from N96.7 billion figure at the end of the third quarter (Q3) and a deep plunge from net FX gains of N22.4 billion at the end of 2022.
Two major cost increases made significant incursions into the revenue gains, which are interest expenses and net impairment charges for credit losses. Interest expenses grew well ahead of interest earnings at 105.5 percent to N387.7 billion, compared to the 66.3 percent increase. Net interest income, therefore, grew at a slower pace of 45.9 percent to N530 billion at the end of the year. The net impairment charge for loan losses rose by 192.1 percent in the year to N200.4 billion, compared to a drop of 25.2 percent to N68.6 billion in 2022. This is the most rapid expansion in bad lending charges the bank has recorded since 2015. The high rise in credit losses lowered the margin of increase in net interest income after the loan loss expenses to 11.9 percent to N329.6 billion at the end of the year. This is nothing but miserable.
FBNH remains a catch-up bank , far below all its peers where it matters most . Analysis of the books of the Tier banks during this period is a reference point . Access Holding had the highest gross earnings at N2.59trn while GTCO had the lowest at N1.19trn. However, despite the above figures attributed to FBNH , its new CEO still has a lot of job to do and learn from his colleagues. For instance, when their revenues are compared to their profits , only 20 percent of FBNH was converted to profit as its profit margin . The situation of FBNH becomes glaringly disastrous particularly when compared with the industry best in class like GTCO .
In spite of the fact GTCO had the lowest gross earnings of N1.189trillion compared to N1.52tr of FBNH,its profit after tax hit N539.4 billion which means the bank was converting every N100 made at the top line to N45 at the profit level compared FBNH’S N20 . GTCO not only had the highest net interest margin, its return on equity, and return on assets were also the best . GTCO was the most cost-efficient, with the lowest cost-to-income ratio of 29.10%, while FBN Holding was the least efficient .
In terms of the fundamental valuation of the banks ,GTCO had the highest price-to-book value and price-to-earnings at 0.96x and 2.31x, This implies that GTCO’s market value reflected its underlying book value and earnings more than the remaining banks. For FBNH the situation is miserable .
Despite the high-interest rate environment, GTCO had a 1.80% cost of funds, significantly lower than its peers, with Access Holding having the highest at 4.90%. GTCO seems to have better financial health than others based on the financial ratios despite having the lowest gross earnings, profit, and asset size .
In this analysis, what is clear is that FBNH did not excel in any of the above performance indicators . Despite its huge asset and earnings, its profit is half or less than half of any tier 1 bank.
Meanwhile,GTCO is not the only one that Alebiosu need to learn from . Zenith Bank is another one The bank took the lead in terms of profit at N795.96bn, ahead of UBA (N757.68bn) and Access Holding (N729.00bn). Its high earnings made its earnings per share grow to a double-digit, with Zenith Bank taking the lead at N21.55k and FBNH the least . This implies that FBN Holding incurred high operating costs, eating deep into the profit .
Access Holding got its laurel too. It retained its position as the highest customer depositor at N15.32trn ahead of UBA and Zenith.
Due to above ugly scenario, the bank’s stakeholders wanted a complete departure from past in FBNH. They want a leader or ceo with capability not only to transform the bank but the entire industry, reinvent the bank’s profit engine,regenerate the bank’s core strategies and unlearn its past to recapture the industry leadership for FBN.
The Challenges Before the New CEO ,The Fears
1.Fear of Resurgence of Poor Corporate Governance
The fear of a reenactment of some ugly trends of the past, particularly the poor corporate governance and ineptitude leadership, that put tne bank on precipice before it was rescued by the regulatory authorities and the man some hated to see as CEO are now the raging concerns surrounding the appointment of Alebiosu.
Some stakeholders who spoke to this medium were still restless over the tendency of a few powerful individuals to unduely hijack the contol of the bank for selfish interests. The alleged Board of Directors’ overwhelming influence over his immediate predecessor is specifically their reference point ; some powerful individuals were accused of allegedly dictating to the past CEO leading a flagrant abuse of insider loans without minding the critical place of good corporate governance that consequently truncated the bank’s potentials .
Though the new CEO has an impressive profile to lead the bank but the true is that a strong profile is not enough . The current fear is pinned down to the speculation that the controversial former board chairman of FBNH ,Obafemi Otudeko, who is now the biggest single shareholder, is allgedly the donor of the new CEO.
Alhough there is no fact to back this claim up ,analysts believed this may not be far from the truth with the second largest single shareholder, Femi Otedola,appointed as the new board chairman, it may not unthinkable that the biggest single shareholder might have laid claim to the appointment of the CEO . And if it is true, the heated controversy over him in the past might stil linger ,after all ,once bitten twice shy they say .
2.Task of Refocusing the Bank
Even without any unnecessary interference from the board as it has been speculated ,what cannot be disputed is that the new CEO needs some iron teeth to break some hard nuts before him considering the fact that FBNH is currently competitively enfeebled relative to its peers. .Though there are some hopes on the horizon for better performance,FBNH is yet to be transformed or positioned to capture the industry leadership; at best it remains a catch-up player with inefficient profit engine.
As opposed to a company competing for the future , FBN leadership is still believed to be positioning the bank optimally within the existing structure and value chain configurations that could only yield less competitive values and not deliver the expected competitive advantages that could position to outperform its rivals.
This problem emanated from its leadership conception of its strategy as merely a positioning game . While this view is certainly legitimate, it is insufficient if the goal is to occupy the high ground in tomorrow’s industry . With this strategic stance , analysts believed it will be difficult for it to come out from the trap of catch-up it entered already due to its leadership poor foresight compared to its farsighted competitors.
Without any doubt, FBNH is overdue for transformation and this is another critical task confronting the new CEO . Some observers still believed the bank’s strategic position still remains less impressive relative to its peers,a situation which becomes clearer when one peeps deeply into this bank’s systems and operations.
The first thing that stares one in the face whem its operations come under a floodlight is a management without a clear and broadly shared understanding of how the industry may be different in the future: a bank competing mostly for today more than the future. In fact , it lost its industry leadership to the few younger banks for this simple reason .
Competition for the future is competition for opportunity share rather than market share ; a competition to maximize the share of future opportunities which a company could potentially access within a broad opkportunity arena is utterly different from competing for today or market share which some corporate leaders, like FBN , sometimes give too much or undue attention to , For FBNH to capture a larger share of future opportunities and consequently the industry leadership,the new CEO is expected to build new competencies , change the definition of its “served market” and challenge its traditional perspectives on strategy and competition. Otherwise, the bank will remain on the treadmill for life .
For this strategic lacuna alone , FBNH has been battling poor strategic position for some decades now . Alebiosu is surely inheriting a bank whose competitors’ leadership’s headlights outshine his own , a bank whose management point of view of the future is believed to be less competitively unique .
Those lapses have inflicted some damaging impacts on this bank’s image and strength..As opposed to its strategic position few decades in the past, the bank has now become less influential in setting the new rules of competition in the industry just as it is now less regularly defining the new ways of doing business, building new capabilities and setting new standards for customers satisfaction as it was known for .
Without any controversy , FBNH has become less a rule maker than a rule taker within its industry simply because it has been less intent on challenging the industry status quo than protecting it ; less fully alert to the dangers posed by new ,unconventional rivals and less keen at reinventing the current business model . The issue is that its management is not regenerating core strategies as much as it is re engineering the core processes,.
Not only the above ,the .bank is not believed to be pursuing growth and new business development with the same passion it is pursuing operational efficiency and downsizing. Moreover, with a less percentage of the company improvement efforts focused on creating new advantages new to the industry compared to that focused on merely catching up with the competitors , the bank has become a shadow of its former self. .
Even its so-called transformation agenda is mostly defensive than offensive driven by its competitors’ view of opportunities or the actions. Consequently, its management has remained more of a maintenance engineer keeping today’s business humming along than architect imagining tomorrow businesses . The new CEO is expected to reverse these trends that have rendered it less competitive relative its peers. .The negative impacts of those trends are confirmed by its figures too in the last one decade
The Challenge of Industry Transformation
The organizational transformation challenge faced by FBNH today is, no doubt, the direct result of its leadership failure to reinvent the industry and regenerate the core strategies a decade or more ago.
Because it has surrendered its leadership in the task of industry transformation , the bank had developed a laggard crisis-proportion of organizational transformation problems . Reskilling employees, selling off businesses wholesale and engaging in slash-and-burn restructuring have become its usual engagements giving few younger banks to take over the leadership slot .
But this may not be farfetched. When a leadership of a company’ is driving toward the future and looking out the rear-view mirror too much, the tendency of having a wrong kind of organization, skills, systems, and behaviors in a radically transformed banking industry is certain .
Its wrong kind of organization, skills, or people was worsened by its management inability to wake up too early to reconfigure its organization, skills, and people in time to intercept the trends that were dramatically reshaping its industry as well as its organization and skills . Another thing is that its skills and ,organization are believed to be inappropriate to today’s industry context
Moreover , the dimensions of the organizational transformation task faced by FBNH were established mostly by newcomers who changed the rules of the game rather than by its foresight ,driven by deep insights into opportunities that propelled them to higher level,. Unlike FBN leadership, smarter ,younger banks had demonstrated better response by moving more quickly and adapting to the changing industry environment
Though some analysts believed FBN is successfully managing the task of organizational transformation, there is little evidence that the bank has become fleet-footed. Even if it were so, it is not a recipe for extraordinary growth and profitability.
The only recipe before the new CEO to reclaim the industry leadership is to take charge of the process of industry transformation ,reinventing the industry and regenerating strategy, not reengineering processes .
And the way out is to create the future .To create the future the new CEO is expected to change in some fundamental way the rules of engagement in a long-standing industry redraw the boundaries between industries and/or and create entirely new industries
.It must not only create the future but to get to the future first , and the prerequisite for this and a precondition for staying out in front is a capacity to invent new industry and reinvent the old one .
Analysts know the enormous negative impact of the bank’s outdated organizational culture on its progress and believed only a complete review of its strategic,organizational and competitive paradigms by a Ceo that is unorthodox could give the bank a complete transformation or rejuvenation needed to recapture the industry leadership.
No doubt , FBNH is in a dire need of that sector’s leadership but that ambition is so herculean that neither the likes of the dilettantes nor the merely intellectually curious leaders who had occupied that slot of its leadership in the past could handle it . This view may not be misplaced. Whether FBNH could regain its leadership position or depends on the capability of its new CEO to reverse the bank’s current strategic drift .. REGENERATING STRATEGY
In the last two decades a substantial amount of FBN market share was gradually being surrendered to some new generation banks like Zenith, GTCO and Access .Recognizing that it was on a slippery slide it started to benchmarked its competitors and fundamentally reengineered its processes trying to reduce its costs, improve quality, and satisfy customers. But though the bank has succeeded in halting the erosion of its market share to some extent , it failed to recapture much share to dominate the market as it used to do before .Till today ,few banks have continued to gain better market share than it throwing FBN to a catch-up mode .
To change the above status , the new CEO needs to create new businesses. To achieve this goal , FBN would have had to regenerate its core strategy and reinvent its very concept of self: its channels, manufacturing processes, customers, criteria for promoting managers, metrics for measuring success, and so on.
The new leadership must wake to the new reality that while catching up is necessary, it’s not going to turn FBN into a leader .Though it can make a company better but not different .Becoming smaller and better are not enough. The point is that it is not enough for a company to get better and faster . Though these tasks are important , company must also be capable of fundamentally preconceiving itself, of regenerating its core strategies, and of reinventing its industry. In short, a company must also be capable of getting different The inability of its past leaders to do the above has left the bank on its catch-up mode .Its 2023 results confir m this view as much.
Competing for the future to create and dominate emerging opportunities—to stake out new competitive space is one top and critical aspiration of every world class leader. FBNH is in.a dire need of it too.. However ,as in every valuable endeavor it also highly and more challenging than playing catch up simply because you have to create your own road map.
Moreover, the goal is not simply to benchmark a competitor’s products and processes and imitate its methods, but to develop an independent point of view about tomorrow’s opportunities and know how to exploit them. Because it is a path breaking initiative it is a lot more rewarding than benchmarking. For those who aspire for it they know one doesn’t get to the future first by letting someone else blaze the trail. This one area where the new FBNH could make the difference.
As demanding as it is some ceos with a drive to outperform others make it their priority
.The question now is what is it that compels some companies rather than others to take up the difficult challenge of inventing the future? What allows some companies to create the future despite enormous resource handicaps, while others spend billions and come up short? Why do some companies seem to possess over-the-horizon radar while others seem to be walking backward into the future? In short, what does it take to get to the future first?
At a broad level, it requires four things: an understanding of how competition for the future is different; a process for finding and gaining insight into tomorrow’s opportunities; an ability to energize the company top-to-bottom for what may be a long and arduous journey toward the future; and the capacity to outrun competitors and get to the future first, without taking undue risks.
FBNH needs to restrategize to change its status to that of a corporate champion. Those who take this path are the corporate champions who think differently about strategy and recognize that a firm must unlearn much of its past before it can find the future ; they know it is not enough to optimally position a company within existing markets ,though the challenge is to pierce the fog of uncertainty and develop great foresight into the whereabouts of tomorrow’s markets ; they recognize the need for more than an incrementalist , annual planning rain dance and know what is needed is a strategic architecture that provides a blueprint for building the competencies needed to dominate future markets.
They are less concerned with ensuring a tight fit between goals and resources and is more concerned with creating stretch goals that challenge employees to accomplish the seemingly impossible; they go beyond the allocation of scarce resources across competing projects and try to overcome resource constraints through a creative and unending pursuit of better resource leverage.
They equally know that companies not only compete within the boundaries of existing industries, but also compete to shape the structure of future industries ; that competition for core competence leadership precedes competition for product leadership, and they conceive of the corporation as a portfolio of competencies as well as a portfolio of businesses. They recognize that competition often takes place within and between coalitions of companies, and not only between individual businesses.
To capitalize on foresight and core competence leadership, they know a company must ultimately preempt competitors in critical global markets; that the issue is not so much time to market, but time to global preemption. To become a corporate champion, the new CEO of FBNH and the Board of Directors must restrategize differently as those highlighted above , set aside its drive for protecting the past at expense of the future. .
They also think differently about organizations .Although the voices calling for a new organizational paradigm (leaner, flatter, virtual, modular, etc.) have been numerous and vocal . However lean and fit an organization, it still needs a brain. But the brain is not the brain of the CEO or strategic planner. Instead it is an amalgamation of the collective intelligence and imagination of managers and employees throughout the company who must possess an enlarged view of what it means to be “strategic.”
