FirstBank’s Commitment to Service Yields Stronger Ratings, Accolades

In its over 125 years of existence in Nigeria, FirstBank has shown its commitment to not just building value for its customers and shareholders but also ensuring that its immediate community grows. This is evident in its tagline of ‘woven into the fabrics of society,’ Nume Ekeghe writes about the outcome of the bank’s activities

Having gone through a turbulent period last year, FBN Holdings Plc seems to be back on track as the holding company alongside its commercial banking arm, First Bank of Nigeria, has in recent times been on the receiving end of positive ratings and accolades.

The Banker’s Top 100 African Bank Rankings published by the Financial Times last week put First Bank at the top of the list of best banks in Nigeria. Top African Ratings, which is acclaimed to be the largest and most important edition for the African continent, ranked First Bank number one in Nigeria on overall performance with it 2021 end-of-year audited financials.

It was also ranked number one on profitability, efficiency and return on risk as its growth was ranked second in the country, testifying to the impressive performance of the financial entity. This was also corroborated by the recent upward review of the bank and holding company’s ratings by an international rating agency.

Last month, Fitch Ratings upgraded the ratings of FBNH signifying its confidence in the financial conglomerate. According to Fitch in the rating statement, the upgrade of the Long-Term IDRs follows that of the VRs, reflecting that corporate governance irregularities publicly raised by the Central Bank of Nigeria (CBN) in April 2021, including two longstanding related-party exposures, have largely been addressed.

 Upgrade in Ratings

In May last year, the rating agency had affirmed FBNH ratings at B-‘ with a Negative Outlook, following the boardroom crisis that saw the Central Bank of Nigeria’s (CBN) replacing of FBNH and FBN’s boards. The identification of corporate governance failings and the imposition of corrective measures are tolerable at the rating level had impacted the ratings of the bank.

According to Fitch Ratings, the financial conglomerate’s rating has been upgraded to ‘B’ with a stable outlook signifying that irregularities that gave way to the negative ratings no longer hold water, as it said “risks to capitalisation have receded, helped by strong internal capital generation since the irregularities were raised.”

Stating that corporate governance issues have been addressed, Fitch said “according to management, the two related-party exposures highlighted by the CBN, which included equity and credit exposures to two companies of whom FBNH’s previous chairman was also chairman, have largely been disposed of and repaid. 

“Fitch understands from management that FBNH and FBN have not been subject to penalties in relation to irregularities raised by the CBN in April 2021 and no further irregularities have been raised.”

The rating agency also noted that First Bank of Nigeria (FBN) the commercial arm of FBNH, impaired loans ratio has declined significantly to 5.6 per cent as at the end of the first half of 2022 from a peak of 25 per cent at the end of the 2018 financial year as a result of sizeable write-offs, successful restructurings and recoveries.

Pointing out “the flattering effect of strong loan growth” the rating note said, “Stage 2 loans remain significant at 15 per cent of gross loans at H1 2022, but Fitch expects these to decline as oil and gas exposures return to performing status. Specific loan loss allowance coverage of impaired loans at 49 per cent at end of H1 2022 is acceptable in view of its collateral levels.”

On the profitability, it said “FBNH delivers healthy profitability, as indicated by an operating return on risk-weighted assets (RWAs) averaging 2.6 per cent over the past four years from four per cent in 2021, underpinned by large recoveries on a previously written-off loan. Earnings benefit from a low cost of funding and strong non-interest income but are constrained by a high cost-to-income ratio of 74 per cent in 2021 and significant loan impairment charges (LICs) in recent years.”

Asides this it said on funding, “FBN’s customer deposit base, which is 76 per cent of total funding at end- 1H22) comprises a high share of retail deposits (64 per cent at end-2021) and current and savings accounts (81 per cent at end-1H22), supporting funding stability and a low cost of funding. Depositor concentration is fairly low. Liquidity coverage is comfortable in local and foreign currencies.

Building Stronger Corporate Governance

The rating note also pointed out the improved capitalisation of the holding company saying its “FCC ratio of 19.1 per cent as at end-H1, 2022 has been on an upward trend in recent years, as a result of strong internal capital generation, which has been influenced by a modest dividend payout ratio.

“Impaired loans net of specific loan loss allowances has declined as a share of FCC in recent years to a moderate 12 per cent at end-H1 2022. Pre-impairment operating profit is sizeable (an annualised 5.1 per cent of average gross loans in 1H22), providing a reasonable buffer to absorb LICs without affecting capital.

“FBNH’s and FBN’s ESG Relevance Score for corporate governance has been changed to ‘3’ from ‘4’, reflecting our view that corporate governance irregularities publicly raised by the CBN have been addressed without penalty and therefore the factor is no longer relevant to their ratings.

“Fitch has also upgraded the issuers’ National Long-Term Ratings to ‘A(nga)’ from ‘BBB(nga)’, reflecting their improved creditworthiness relative to that of other issuers in Nigeria.”

 Building Acts of Kindness

Besides the improved rating by Fitch, Euromoney Market Leaders had ranked First Bank as market leader in Corporate and Social Responsibility (CSR) as well as Environmental, Social and Governance (ESG).

This is in testament to the dedication of the bank towards acts of kindness in the places where it operates. The bank goes beyond providing service to its customers by weaving itself into the fabric of the society through its several activities. In celebrating the fifth edition of its Corporate Responsibility & Sustainability (CR&S) week, the financial conglomerate had committed to impacting the lives of individuals in its host communities across seven countries, including Nigeria, United Kingdom, Ghana, DRC, Guinea, Sierra Lone, Senegal and Gambia.

The FirstBank CR&S, named SPARK, an acronym for Start Performing Acts of Random Kindness is a dedicated week designed to offer opportunities for employees to give their time & resources to define causes in line with the Bank’s CR&S strategic approach. The CR&S Week gives employees in the bank opportunities to give their time & resources to defined causes. 

Digital Banking Transformation, Financial Inclusion

Euromoney Market Leaders also ranked the bank as Highly Regarded in Corporate Banking and Digital Solutions and Notable in SME Banking. Earlier this year been named Best Banking Digital Transformation Nigeria at the International Investor Awards 2022, in recognition of its continued efforts at reinventing its digital banking channels which have been central to reinforcing the Bank’s leading role in promoting a cashless society in the country whilst putting customers at an advantage in enjoying a secured and seamless digital banking experiences.

It was also recognized with the Best Bank in Nigeria 2022 award for its leadership role in promoting financial inclusion in Nigeria, which has been integral to improving lives and stimulating businesses of individuals across the country. 

First Bank is still taking the lead in financial inclusion drive in the country with its 750 business locations and over 150,000 Banking Agents spread across the 774 Local Government Areas in Nigeria. Besides these, the bank has been handy at promoting digital payment in the country and has issued over 10 million cards, the first bank to achieve such a milestone in the country. FirstBank’s cashless transaction drive extends to having more than 10 million people on its USSD Quick Banking service through the nationally renowned *894# Banking code and over 4.5 million people on FirstMobile platform.