Rewarding Corporate Governance Adherence

Goddy Egene writes on the Best Corporate Governance in Nigeria Award by the World Finance that was recently won by FBN Holdings Plc

FBN Holdings Plc is the non-operating financial holding company of one of the largest banking and financial services organisations in Africa. It is a truly diversified financial services group, offering a broad range of products and services, covering commercial banking, merchant banking and asset management and insurance to millions of customers.

Over the years, FBN Holdings has remained resilient overcoming the challenging operating environment to deliver significant value to shareholders in its financial performance.
For instance, the group posted gross earnings of N627 billion for the 2019 full year, showing an increase of 6.7 per cent compared with N587.4 billion in 2018. Profit before tax (PBT) grew by 30.9 per cent to N83.6 billion in 2019, from N63.9 billion in 2018, while profit after tax (PAT) rose 26.5 per cent to N73.7 billion compared with N58.2 billion. Earnings per share grew from 161 kobo to 195 kobo, out which the board recommended that 38 kobo be paid as dividend to the shareholders.
The group has consolidated on that performance going by the results for the first quarter (Q1) ended March 31, 2020.

Details of the Q1 performance showed that FBN Holdings posted net interest income of N60.253 billion, compared with N71.662 billion. Impairment charges fell from N13.847 billion in 2019to N9.7 billion, making the group to end the quarter with a profit before tax of N28.68 billion as against N17.764 billion. PAT grew by 62 per cent to N25.7 billion, from N15.8 billion.

Apart from strengthening its risk management architecture, another factor that has led to the improved performance of the group is its strong corporate governance.
FBN Holdings recently won the 2020 Best Corporate Governance in Nigeria Award by the World Finance. World Finance is renowned for its comprehensive coverage and analysis of the global financial services industry, international business, and the global economy. For the past 13 years, World Finance has been celebrating corporate achievements in the areas of corporate governance, innovation, and market leadership in the financial services sector across all the regions of the World.

And FBN Holdings Plc won this award for the second consecutive year on the back of its strong corporate governance practices and outstanding leadership in the Nigerian financial services industry.
Commenting on the award, Group Managing Director, FBN Holdings Plc, UK Eke, said: “Winning the award in quick succession is a demonstration of not only the strength of our corporate governance practices but also its resilience. As a holding company, we emphasize the highest standards in corporate governance across all operating entities in our quest to deliver value to our numerous stakeholders.”

The award came at a time when FBN Holdings is concentrating more focus in the area of core competence through divestment. A McKinsey & Company study of the performance of the 200 largest United States corporations from 1990 to 2000 revealed that companies that actively combined divestment in managing their business portfolios created substantially more shareholder values than those that passively held their businesses.

Some legendary executives that leveraged tactical divestiture programmes to remarkably enhance the fortunes of their organisations, according to the earlier Harvard Business Review, include Jack Welch. Proactive divestment fast becoming a trend
Therefore, it was not surprising when FBN Holdings Plc in April 2020, revealed it was in discussions to divest from its insurance business as part of a broader strategy to focus on the group’s core business of banking.

According to Eke the divestment would enable the group to deliver greater value to all stakeholders.
“The successful divestment is one more step in the direction of our medium to long term strategic objective of focusing on our area of core competence, for greater efficiency, and deliver greater value to all our stakeholders,” he said.

The core competence he referred to is the banking business which has been contributing the most to the group’s bottom line. In the financial report for the year ended 2019, First Bank contributed 88.2 per cent to gross earnings, and 85.2 per cent to the profit before tax of the group.

New generation and shared leadership
For over a century, First Bank held sway as the leader in Nigeria’s financial services sector. Though it remains the most valued banking brand, the increasing dynamism in the sector has seen the bank cede some part of its sectoral leadership to a couple of other institutions that gained market shares following their emergence as new generation banks in the 1990s.

However, in pursuit of its brand purpose to always put customers, partners and stakeholders at the heart of its business, while standardising customer experience and excellence in financial solutions across sub-Saharan Africa, the management at FBN Holding has taken strategic steps at reclaiming category leadership of the banking sub-sector in recent years. One such measure has been the deliberate re-tooling of its operational models with technology and innovations.

This committed effort to upscaling its digital banking in Nigeria has been quick to yield commendable results. For example, First bank was the first to issue over 10 million debit cards in Nigeria. Over 228 million users on its USSD banking service through the nationally acclaimed *894# banking service and First Bank pulled in over 3.4 million users on its Firstmobile platform.

Primed for full banking sector leadership
However, these substantial strides are about to get better for the Nigerian banking public going by the words of CEO of First Bank, Dr Adesola Adeduntan. Commenting on the bank’s performance in the 2019 financial year, he said: “Overall, we are pleased with the progress that has been made in our digital journey as over 85 per cent of our customer-originated transactions are now processed on digital channels. We will continue to leverage technology to offer superior customer service and enhance operational efficiency.

With this divestment therefore, the apple farmer has pruned the vineyard, letting go of a perfectly good insurance business apple. The FBN Holding orchard is about to deliver bountiful harvests of first-class modern banking solutions in a technology-immersed future to the youth and the youth-at-heart.