CBN directs immediate sack of First Bank, FBN Holdings’ Directors

• Reinstates Adeduntan as MD, Shobo DMD
• Appoints new board members

The Central Bank of Nigeria, yesterday, directed immediate sack of all directors of FBN Limited and FBN Holdings Plc, as well as the reinstatement of the Managing Director/Chief Executive Officer, Mr. Sola Adeduntan.

The Apex bank stated that the move was to preserve depositors and shareholders’ confidence as well as stabilise First Bank Plc in the face recent boardroom tussle.

As replacement, CBN named Remi Babalola as Chairman of FBN Holdings Plc. Other Directors of the Holdco are Dr. Fatade Abiodun Oluwole, Kofo Dosekun, Remi Lasaki, Dr Alimi Abdulrasaq, Ahmed Modibbo, Khalifa Imam; and Sir Peter Aliogo UK Eke as Managing Director.

CBN also appointed Tunde Hassan- Odukale as Chairman for First Bank Plc  and Sola Adeduntan as Managing Director.

Other Directors are Tokunbo Martins, Uche Nwokedi, Adekunle Sonola, Isioma Ogodazi, Ebenezer Olufowose and Ishaya Elijah B. Dodo. Mr. Gbenga Shobo was named the Deputy Managing Director while Remi Oni and Abdullahi Ibrahim were appointed as Executive Directors.

CBN Governor, Mr. Godwin Emefiele, who announced the apex bank’s decision at a press briefing in Abuja, explained that the bank took the step in line with its powers under BOFIA 2020 and on the need “to preserve stability of the bank, so as to protect minority shareholders and depositors.”

Emefiele attributed the bank’s problem to bad credit decisions, significant nonperforming insider loans and poor corporate governance practices, amongst others.

The governor highlighted the challenges confronting the bank and remedial measures prescribed by the apex bank to deal with it.

He condemned the First Bank board’s unilateral decision of effecting changes at the top echelon of the bank, while leaving the CBN in the dark. “Ordinarily, the board is vested with the authority to make changes in the management team subject to CBN’s approval.

“However, the CBN considers itself a key stakeholder in management changes involving FBN due to the forbearances and close monitoring by the bank over the last five years aimed at stemming the slide in the going concern status of the bank.

“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,” said Emefiele. Describing FBN as one of the systemically important banks in the Nigerian banking sector in terms of historical significance, balance sheet size, large customer base and high level of interconnectedness with other financial service providers, amongst others, Emefiele said the apex bank stepped into the crisis to stabilise the bank.

“By our last assessment, FBN has over 31 million customers, with a deposit base of N4.2 trillion, shareholders’ funds of N618 billion and NIBSS instant payment (NIP) processing capacity of 22 per cent 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.

“The bank maintained healthy operations up until 2016 financial year when the CBN’s target examination revealed that the bank was in grave financial condition with its capital adequacy ratio (CAR) and non-performing loans ratio (NPL) substantially breaching acceptable prudential standards,” he said.

He traced problems at the bank to bad credit decisions, significant and nonperforming insider loans and poor corporate governance practices.

“The shareholders of the bank and FBN Holding Plc also lacked the capacity to recapitalise the bank to minimum requirements. These conclusions arose from various entreaties by the CBN to them to recapitalise. The CBN stepped in to stabilise the bank in its quest to maintain financial stability, especially given FBN’s systemic importance as enumerated earlier”, he said.

The governor listed some regulatory actions taken by the CBN at the time to include change of management team under the CBN’s supervision with the appointment of a new managing director/chief executive officer in January 2016, grant of regulatory forbearances to enable the bank work out its nonperforming loans through provision for write off of at least N150 billion from its earnings for four consecutive years, granting of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions; renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.

According to him, 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. For instance, profitability, liquidity and CAR improved whilst NPL reduced significantly.

“Notwithstanding the significant improvement in the bank’s financial condition with positive trajectory of financial soundness indicators, the insider related facilities remained problematic. “The insiders, who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities, which contributed to the poor financial state of the bank,” he said.

He noted that CBN’s recent target examination as at December 31, 2020 revealed that insider loans were materially non-compliant with restructure terms (e.g. non perfection of lien on shares/collateral arrangements) for over three years despite several regulatory reminders. The bank had yet to divest its non-permissible holdings in non-financial entities in line with regulatory directives.

Emefiele pointed out  that the CBN decided to retain Mr. UK Eke and Mr. Adeduntan as Managing Director of FBN Holding and First Bank of Nigeria Ltd, respectively because the apex bank was satisfied with working with both men to clean up the books of the company. Indeed, Emefiele said that the CBN believes that Adeduntan had issues with some powerful shareholders because he stood his ground and insisted that the right things be done.

Industry watchers were taken aback on Wednesday when the former Board of Directors of First Bank of Nigeria appointed Gbenga Shobo as Managing Director/ Chief Executive Officer (CEO). The appointment was disclosed in a statement made by the bank’s Chairman, Ibukun Awosika, on Wednesday, April 28, 2021.