To make less than N22 as profit from every N100 made as its revenue, confirms the operations of First Bank Nigeria Holdings is driven by nothing but a refurbished profit engine
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No doubt , First Bank of Nigeria Limited, FBN, a member of First Bank Nigeria Holdings,FBNH ,occupied a proprietary position, became the industry standard and its architectural model for decades .But now, it has become a battlefield of sort for the rich , a treadmill player in dire need of a committed and competent leadership
Analysts are worried about its quality of leadership. “FBNH doesn’t need dilettantes or a merely intellectually curious leadership ,but a leadership that is not content to follow, who desires to rewrite the rules of the game ,unafraid of orthodoxy, more inclined to build than to cut , the one that is concerned to make the difference than making career ; only a leadership that is absolutely committed to staking out the future first could salvage its current highly impaired strategic position,” ‘says an analyst.None in the past leaders has displayed the above leadership qualities.
The point some analysts are making is that its travail could be situated on its few but influential leaders and investors allegedly holding its destiny to ransom,fighting for their selfish interests.
This view may notbefarfetched. “From the aspirational but shadowy administration of Bernard Longe to the conservative and minimalist management of Moyo Ajekigbe to the aggressive and wildly transactional tenor of Bisi Onasanya to the ‘paint and repair’ era of Adesola Adeduntan, the bank has swung from one transition to another with different outcomes”, an analyst had noted few years back .
Since the mid-1990s, the bank has had to cope with CIR, CAR and NPL difficulties; the elephant had inelegantly dropped to its knees barring a few intermediate years of the Ajekigbe era.
The most obvious of its challenges is the power tussle among its leading and influential shareholders. This debacle started few years ago . First was a fight to the finish battle between Otudeko,former Board Chairman,FBNH and Adesola Adeduntan, FBN’s MD\CEO ; it moved to another stage with a warfare between Femi Otedola and Tunde Hassan-Odukale after Otudeko was forced to step down in 2021 ; in the process, the board chairman used to replace Otudeko, Remi Babalola, had to step aside when he couldn’t withstand the heat generated by the rivalry between the duo and the way the regulatory authorities intervened in the battle
The ugly scenario had wrecked an untold havoc on this bank and ordinary shareholders before its current resurgence ; this bank ,once regarded as the most reliable and secured , had become a corporate laggard ridden by cataclysmic misfortunes ; even with the intervention of CBN, it is now operating on the treadmill overtaken by few younger banks due to instability,frauds and managerial ineptitude .
The Return of the Evil Years
When the bank changed its leadership early last year , it was with a celebration galore and much hope ; unfortunately, despite that change ,the battle of wit has started again and is yet to cease.
Now ,the battle is mainly between Otedola and Otudeko with the tendency for the bank and ordinary shareholders becoming the scapegoat again ; the most interesting issue is that Otudeko is made to look ambitious ,dishonest and greedy. But Otedola is not believed to be a saint too by his critics.
For now, other stakeholders’ expectation to reverse the bank’s uninspiring strategic position is becoming more hopeles.
Expectedly, the ongoing power tussle among the largest single shareholders for the control of FBNH has continued to raise some critical questions against the bank and the scramblers too : why are few Nigerian billionaires fighting dirty over a bank believed by some analysts to be driven by a refurnished profit engine? Why couldn’t either Otedola, Otudeko ,Odukale or Adenuga , among those involved in the power tussle, float a bank with their billions, if they are so desperate to have an overwhelming control in a bank ? Why couldn’t they go for other bank like Union or Zenith Bank? What makes FBN so unique to be so irresistible for their investments?
The rationale behind those questions is the fear of the threat the ongoing “unhealthy rivalry” poses to the survival of this bank , safety of other investors investments and its entire stakeholders’ interests , particularly the nation based on the bank’s strategic implications for the economy .
Heated Controversy Against New Leadership
The return of the evil years of unhealthy scrambling for domineering influence by few stakeholders is raising questions against the new leadership :where is the hope reposed on Otedola ,a visionary entrepreneur with a track record of pioneering businesses, growing and transforming corporations ?
The above question may not be misplaced. His election was prompted by his rich experience in corporate boards having held several board memberships, his disrupting and redefining standards in the downstream sector of the oil and gas industry , successful business turnaround, diversified portfolio, prompt financial reporting and strong corporate governance.
Unfortunately ,the man who was brought in to supervise FBNH’s Board of Directors purposely to transform the oldest Nigerian bank from its laggard status to a corporate champion is now supervising crisis or allegedly fighting another battle of supremacy .
Though some optimists believed he has the capability to restore the industry leadership to FBNH , the group’s recently released financial results for 2024 confirm the once exemplar organization is yet to show any sign of any change of a status from a laggard to a champion
When one peeps into the operations of FBNH ,what stares one in the face remains uninspiring ; the bank still displays more attitudes of a laggard than those of a corporate champion. First Bank remains more a rule taker than a rule maker within its industry , a bank with less intent on challenging the industry status quo than protecting it ; a player not fully alert to the dangers posed by new unconventional rivals or keen at reinventing the current business model with some younger banks continuing to dictate the industry structure to their own advantage.
As the above traits of a laggard continue to resonate in the operations of FBNH, analysts believe two things could be responsible: it is either the new leadership does not have what it takes as some had claimed or not committed to move this bank from its current laggard to the desired champion status because of their selfish ambitions.
Exploiting FBN’s Resilient Brand Image For Selfish Interests.
One thing that keeps these few investors on their toes seeking the controlling stakes in FBN is its longstanding ,resilient and rich brand image that made the bank irresistible to the customers even when it was almost a dead bank before it was rescued by CBN. This singular attribute continue to oil its revenue generating engine. However, instead of exploiting this advantage by converting its competitive revenue volume to generate better value for money for its entire stakeholders , these few single and powerful stakeholders either by their greediness or incompetence only reduce the bank to a laggard.
The issue is that the current leadership as its predecessor has not been committed to turn the bank around . Some analysts believed the struggle by the few moneybags for the controlling shares of this bank is nothing but purely motivated by greed and opportunism.
“Those involved in the struggle know with its highly resilient brand image the problem with First Bank is not the capability to make money as it is endowed with competitive potentials ; unfortunately , either by the commission or omission traced to the greediness or incompetence of those scramblers”, the bank has not been able to deliver competitive value or better value for money relative to its peers.” , a source alleged .
“They exploited its strong and long standing brand image to satisfy their selfish ambitions after gaining the bank’s leadership control by all means ,”,another insider declared last week .They believed the tempo of the struggle is kept and sustained by the fact above .
However, the most unfortunate issue according to this group is that “while other stakeholders have continued to be at the receiving end of the mismanagement and malfeasance ,the biggest beneficiaries are those in the leadership of this bank who continue to feed fat on the bank’s and others misfortunes in one way or the other” , the analyst explained .
But there are others too who believed the above views about the new leadership of FBNH are far from the truth. ” Despite the ongoing squabbles among its single largest shareholders , I want people to know that the current leaders of the bank are sincerely committed and have the capability to deliver its stakeholders’ expectations.”
If the above views of some optimists are true ,as some of those involved in this unhealthy rivalry and their admirers would want others to believe, its 2024 financial year results have proved them wrong for now . It is either they are not committed or competent or both : its embarrassing provisions for impairments, increased funding costs, humongous operating expenses ,declining share price and poor service delivery , confirm the leopard has refused change its spot.
FBN remains a shadow of its former self , operating on the treadmill with catch-up joker as a laggard And for this, the bank has remained poorly positioned in the eyes of the investing public as unstable, less valuable, less resourceful and may be considered unsaved if its humongous luggage of loan impairments is not prevailed upon .
Figures Behind the Facts Against Its Leadership .
The most obvious drawback is the poor status of FBNH’s profit engine , a situation that is not unusual in a company where its leaders are waging war against themselves or where a leadership is incompetent and not committed . When a company fails overwhelming to constantly review the definition of its served market, the value proposition put forward to customers, its margin and value-added structure, the particular configuration of its assets and skills that yields those margins as well as its supporting administrative systems —which together constitute an integral and well-tuned profit “engine of an organization , such a company is surely doomed.
This is particularly so in a changing environment and circumstances ; this is because the tendency is there for its profit engine to become grossly inefficient like that of a car with a refurnished engine .
The above view may not be farfetched. While one profit engine may perform wondrously in one industry environment, any change to that environment typically threatens the engine’s efficiency; also over time, new, more efficient profit engines make older engines obsolete .Not only that, a similar threat to a firm’s profit engine may come from improvements made by the competitors.
FBN profit engine is surely a victim of any of the above circumstances . This is one reason why some observers say its operations are driven by a refurbished profit engine . Truly ,for more than a decade it has remained so due any of the above circumstances driven by absolute mismanagement,malfeasance and incompetence.
FBNH 2024 RESULTS: STILL NOT INSPIRING
Although there have been few improvements which the bank is now celebrating, but the reality is different from what is being painted , particularly from its recently released 2024 financial results .
One of the indicators that confirm this view is its net profit margin or the percentage of gross revenue left after deducting operating expenses, depreciation, amortization, interest, and income taxes : a critical indicator that measures how resourceful a corporate entity is and separates a champion from a laggard.
One good thing about this indicator is that it is so simple to understand and arrive at .Ironically, this is a performance yardstick that is so difficult to be used by FBNH to convince its stakeholders of its competitiveness or that it has successfully staged a comeback.
A look into its book in the financial year 2024 shows , while FBNH grossed ₦ N3.33tr , its profit after tax was just N732b , indicating a retention of N21.90k from every N100 made at the top line as its profit . In other words , less than 22% of the its earnings goes to the bank as its profit while the rest represents the costs at various levels of its operations . This is , no doubt, highly miserable.
One implication of this indicator is that it exposes FBNH as the least competitive bank among its peers since that figure remains the worst when it is bench-marked with the likes of Guaranty Trust Bank. This is particularly so when used as a basis for measuring its resourcefulness, using its financial resources or total assets at their disposal , gross earnings and profitability.
For instance, in the first nine months of 2024, with a total assets of N27.5 trillion and gross earnings of N2.25tr, FBNH delivered N534b as its profit after tax, while GTCO with a total assets of N15.6trn generated N1.798tr as its gross earnings and delivered a profit after tax of N1.085tr in the same period. This translates to GTB converting every N100 generated at the top line to NN60 at the bottom line while FBNH converted its N100 at the top line to a miserable N23 at the bottom line despite the fact that its resources almost double GTCO’s.
The negative impact of the above and other poor fundamentals were disastrous. FBNH’s stock price that rose to N43 per share early last year before crashing to N23 in August the same year confirms the same ;the bank’s share price experienced also a significant decline of 27% YtD in 2024.
One should not be surprised by the crash of its share price in the first place, its growth was believed to be driven more by an unhealthy struggle among its leading shareholders to buy and gain the control of its ownership control, not really a product of its fundamentals.
The reason for the above miserable performance may not be far to seek . In its latest 2024 financial year records,its Net impairment loss on financial asset at N410.810 billion, an increase of +82.62% YoY, unsettled its shareholders ; also while its loans and advances to customers grew by 41%, its interest income from loans and advances to customers declined by 13.42% to N1.364 trillion; the interest expense on its deposits rose by 135%, making up 58% of total interest expenses. The last issue signals that while the bank had grown its deposit base, it is facing higher funding costs.
The above performance should not spring any surprise. Its less inspiring performance in the core banking and cost optimization, the two areas considered to be the critical success factors in banking business , has remained the harakiri that drives its poor strategic position relative to its closest rivals
This may be particularly so where instead of regenerating its core strategies , a company is more busy with re engineering the core processes, pursuing growth and new business development with less passion than it is pursuing operational efficiency and downsizing, leading to a situation where the percentage of its improvement efforts is less focused on creating new advantages that are new to the industry compared to that focused on merely catching up with the competitors.
Moreover, in as much as its transformation agenda is mostly defensive than offensive or its view of opportunities or actions are mostly driven by those of its competitors , when its management is more a maintenance engineer keeping today’s business humming along than an architect imagining tomorrow businesses or where the balance between the hope and anxiety remains more of fear than hope, such miserable features are usually unexpected .
Most importantly, when a management of a corporate entity does not have a clear and broadly shared understanding of how the industry may be different in the future ,when its headlights are not shining farther out than those of its competitors , when its point of view about the future is more clearly reflected in the company’s short term priorities and its point of view of the future not competitively unique, such a company is not expected to operate beyond a treadmill.
Those are the travails of the oldest bank in Nigeria, and until its current leadership shows those capabilites of a company competing for the future , the bank’s performance will continue to exhibit features of a laggard .
