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Published On: Mon, Jan 11th, 2016

First Bank: New Jockeys on the Saddle—Adeduntan’s elephantine challenge (1)

OKEY ONYENWEAKU & JULIUS ALAGBE|          For insiders within the First Bank system, Dr. Adesola Kazeem Adeduntan, FCA, the new helmsman at First Bank of Nigeria Limited, is coming to the job with a well-oiled tool-kit to deliver shareholders’ value. Given his diverse academic accomplishments and solid pedigree, there is mounting enthusiasm that he is the right man for what is perhaps the most challenging, banking position in the country today.

FBNL is not just any other bank. It is really, ‘the bank’, a legacy institution that encapsulates both the high and low points in the banking history of the nation. It is the deposit money lender with the longest history of functioning in the commercial space for well over a century, and has also become very iconic and in the view of many a synonym for banking in Nigeria.

Indeed, to be appointed to the top leadership position of such a venerable institution would be a rare privilege for any banker no matter his pedigree.

However, the job also comes with onerous challenges, to which only the strong hearted and most creative can aspire. First Bank is still Nigeria’s leading lender with credible claims to be the top of the pack. Despite the strong pursuit of such dynamic institutions like G T Bank, Zenith Bank and UBA, it still prides itself as Nigeria’s NO 1 bank. Such claims are not without foundation. It boasts of the largest asset base, the highest number of branches, highest number of staff, and also highest cost profile in the industry. Combining these variables into a profitable synergy has emerged the central challenge of its leadership in recent years.

However, that is not the only challenge now. Adeduntan is coming at a time of serious economic and financial stress in the economy characterised by stringent monetary and fiscal policies that are strangulating operations. With restrictions on access to foreign exchange, increasing cost of operations, and a generally contracting economy, there is sufficient cause for concern about the future not only of the institution, but the industry as a whole.

The bank’s last annual result reveals serious causes for concern in various operating indices. The predominant view within the bank and even among its numerous stakeholders is that its recent postings have been below par.

Sources contacted by Business Hallmark affirmed that the new CEO is indeed not only very well respected in the industry as cerebral and a stickler for excellence and detail, he is also one that can be depended upon to confront challenges no matter how daunting.

‘I worked with him at the AFC and I can confirm that ”Doctor” (which is what we called him then) is indeed a very consummate professional who can stand his ground in virtually every area of thought and endeavour,’ one of his former colleagues during his stint at the AFC remarked.

Further checks revealed that the process by which Adeduntan emerged as helmsman of the bank was indeed a most rigorous one. It was reportedly a series of three interviews with the first one producing a shortlist of 16, the second shortlist of ten and the third a shortlist of 3. It was from this final basket of 3, that the ex-Citibank executive was then picked by the board of the bank, led by Oba Otudeko.

Adeduntan had also exuded confidence as Chief Financial Officer of the bank in his presentation at the Stock Exchange in 2014 during the Group’s Facts behind the Figures;

“I think one thing that is very key to what we have already highlighted is that we are the biggest bank and any time we have these regulatory happenings the impact on us tends to be much more severe.

”There is not a bank today to have its CRR overrun by N60b like we have highlighted and invariably that is about N55billion of lost revenue. Even if we take all that and you put it into the equation, you discover that the overall picture wouldn’t be as bad as it is looking”.

“At bank level, we are not projecting any growth on our expenses into 2015 and that will give you an idea of the kind of hard stance with which we are looking”; Adeduntan had stated.

Whereas industry stakeholders have high expectations, Adeduntan has to begin to prove himself in a turbulent and traumatic financial system which appears to have lost favour from the global system.

In an operating arena where the economy is already in recession, coupled with stiff regulation and tight liquidity, there is a consensus that the opportunity may be very slim for any financial institution to sustain a good profit margin. Market observers therefore ponder what indeed is the magic wand that is left for chief executives of banks, including the new helmsman of First Bank, to use in swimming against the tide and impressing his employers with good returns.

” It is indeed a very challenging time to run a financial institution, however it also offers a chance for those who have the drive to showcase their big guts”, an analyst who would not want his name mentioned in print said. But some others also think that in specific terms, his stint in Citibank will come to bear on the bank’s corporate governance and risk management.

Adeduntan has already introduced himself to the staff as their new Managing Director and promised to engage with them more often. But how does this translate to turning around First Bank?

Challenges ahead

It is usually with subtle fear and anxiety that some leaders step into the large shoes of their predecessors. However, only Adeduntan, can tell how he felt upon his announcement as CEO and his consequent assumption of office on January 4, 2016 to replace Mr. Bisi Onasanya.

“Following an exhaustive and competitive process, we are proud to announce these appointments. In reaching these decisions, we were mindful of the imperatives for a more efficient group structure that will benefit the group’s need to deploy systems which deepen efficiency while expanding revenue and returns on investment, ‘the Group Chairman, FBNH, Mr. Oba Otudeko, said on his appointment.

“We are confident that we have made the right choices in these appointees. In selecting our MD and DMD of First Bank, we were particularly mindful to identify outstanding and top notch professionals with complementary and mutually reinforcing skills set.

“These appointments are a testament to the strength of our succession planning mechanism and the calibre of candidates it produces. It also re-articulates our commitment to put our customers first with the confidence in the value that this new leadership team brings to bear on behalf of the Group, customers and employees, even as we strive to return greater value to shareholders”, Otudeko also enthused.

Whereas the board of FBN limited has expressed confidence in Adeduntan, the onus lies on him to prove that he can navigate the fortunes of what some would describe as a weary and age-beaten financial institution to the next step on its continuing march to the Promised Land.

Business Hallmark’s findings reveal that all eyes are now turned on the new helmsman at First Bank given its strategic position within the group and the usual burdens that are heaped on what is clearly the cash cow of the entire group.

Onasanya had in the last six years grown the Group’s total assets from a paltry figure of N2.009trillion in 2009, representing about 116 per cent to N4.342trillion in 2014.

Similarly, its profit after tax leapt by 559 per cent to N82.838 billion in 2014 from N12.569 billion in 2009, while gross earnings rose by 120 per cent to N480billion in 2014 from N217billion in 2009.

With this performance, First Bank of Nigeria ranked first in almost all financial measurement indices in the banking industry. There is a consensus that the bank has been a lender of choice in supporting businesses of all generation and families in Nigeria and beyond in the last 100 years. But nobody can say with all certainty that it still does that at the first ranking level any more despite achieving the highest gross earnings in the industry in 2014 at N480.6 billion.

Its performance also stood the bank out as the number one in total assets which stood at N4.34trillion at the end of 2014. It has never been a subject of debate that First Bank’s branch network outnumbers that of any other financial institution in the industry. This is not a mean feat.

However, there are concerns that the drawbacks or challenges chipping away at First Bank’s performance capacity are also as huge as its size and achievements. Industry experts believe that there are still yawning gaps in the bank that must be filled by the new management team headed by Adeduntan.

Accordingly, the burgeoning elephant which appears to have danced for so long and seems at a casual glance to have exhausted itself now needs new and fresh strategies to be re- invigorated. This, experts have said is going to be the uphill task facing Adeduntan and his team in a tight regulatory era and environment. Let us take the numbers to underscore this point: whereas the bank’s profit after tax grew by about 17 per cent for the year ended 2014, rising from N70billion in 2013 to N82billion, it however posted a disappointing 50.2billion, representing a 10 per cent drop in profit after tax in the third quarter ended 30 September 2015. This was against a profit after tax of N55.6billion declared in the comparable period in 2014.

There is significant discomfort that the operating costs have been very high at N143billion, while its total exposure stood at N2.6 trillion, higher than that of Zenith Bank, the second highest exposed bank, whose own costs stood at N1.7trillion in 2014. This no doubt is a sign that there may still be serious difficulties and bumps on the way.

Still on the unpalatable circumstances confronting the bank, Adeduntan is expected to work very hard to reduce the bank’s exposure to the Oil and Gas sector which is the highest in the industry at 44 per cent. Another worry is to restore investors’ confidence in its stock which currently trades as low as N4.00 per share from the peak of about N36.00 per share in 2008. This is in addition to ensuring improved quality service delivery in the bank.

But many have asked whether Adeduntan can achieve these in an environment that is already considered harsh and unfavourable for businesses, especially the banking industry.

In fact, there is every reason to believe that non-interest income will be very low in 2016 as Commission on Turn Over( COT) from which banks made a fortune before now has been removed. Public funds can no longer boost the balance sheet of financial institutions given the Treasury Single Account policy of the government which moved huge liquidity out of the industry. Revenues which accrue to banks through the sale of foreign exchange have also been reduced due to lack of liquidity caused by controls and pegging of the Dollar to Naira. What magic can Adeduntan do in this circumstance to return the bank to its glory?

Frank counsel

Analysts have mixed feelings about the current fortunes of First Bank given that it has clearly not returned much to investors, in terms of dividends and capital gains in the last six years even as they expressed their views on where the new CEO should be putting his focus.

”To run a big bank like First Bank is not easy. First Bank is solid but he has to focus on how to manage costs. We are in difficult times now and there is no COT again. So he has to do more”, Managing Director, Financial Derivatives Company limited, Mr. Bismarck Rewane told Business Hallmark in a telephone interview.

Mr. David Adonri, who is Managing Director of High Cap Securities limited said he does not really know the new helmsman very well to comment on his capabilities, but advised that he should know from the onset that shareholders were not happy with the past leadership because of the bank’s poor dividend pay-out records in recent times.

”The new MD should make sure that the dividend pay-out is as competitive as that of GTBank and Zenith Bank. He should also look critically at the bank’s current risk management systems,” Adonri expressed.

”In whatever the bank is doing it should take into consideration the interest of all stakeholders. I think this will help them on what to do”, President of the Association of Stock Brokers Houses, ASHON, Emeka Madubike contributed.

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