FBN Holdings Plc, the parent company of First Bank Nigeria Limited,
is planning to cut about 1000 jobs and focus less on providing loans to
the oil industry in a bid to reverse the 2015 financial year’s 82 per
cent slump in profit.
The lender expects to boost its return on equity, a key measure of
profitability, to between 11 per cent and 14 per cent in 2016 from last
year’s “really bad” figure of three per cent, according to the Chief
Executive Officer of First Bank of Nigeria Limited, FBN’s main
subsidiary, Mr. Adesola Adeduntan.
He said the company was also targeting a cost-to-income ratio of 55
per cent in two years time from 59 per cent, Bloomberg reported. “ROE will be much better than last year,” Adeduntan said in a telephone interview from Lagos on Wednesday.
“At a minimum, we should triple it. We do not shy away from taking
difficult decisions. We used to have above 8,000 people. We’ll push it
down, gradually to 7,000,” he added. Its net profit fell to N15bn ($76m) from N84bn in 2014, as
impairments soared and the economy slowed amid a crash in the price of
crude, the biggest source of Federal Government revenue and export
earnings.
Growth decelerated to 2.8 per cent in 2015, the lowest level since
1999, and may worsen to 2.3 per cent this year, according to the
International Monetary Fund.
First Bank’s non-performing loans ratio stood at 22 per cent at the
end of March, compared with 3.8 per cent a year earlier. Reducing that
figure is the “number one priority,” said Adeduntan. He said the bank would do that by reducing the proportion of its
lending to the oil and gas sector, currently at about 39 per cent of
total loans, and focusing more on blue-chip companies in other
industries.
Adeduntan ruled out any equity raising this year, saying the bank’s
capital adequacy ratio of 17.2 per cent was enough of a buffer and above
the Central Bank of Nigeria’s minimum requirement of 15 per cent. It would still be adequate if the floor is raised to 16 per cent in
July for Systemically Important Institutions, including First Bank. “We continuously evaluate it and the position now is that there’s no
need for external capital,” Adeduntan, 46, who became the CEO in January
after joining First Bank as chief financial officer in mid-2014, said.
“We generate enough internal capital,” he said. FBN’s shares rose by
5.3 per cent to N3.57 on Wednesday. They are, however, still down 30 per
cent this year, more than the Nigerian Stock Exchange All Share Index’s
drop of 13 per cent. The bank’s valuation lags that of its main competitors such as
Guaranty Trust Bank Plc and Zenith Bank Plc. Its stock trades at 0.22
times book value, or the theoretical price that shareholders will get if
all assets are sold and liabilities paid off. That compares with 1.18
times for GTBank and 0.62 for Zenith. “The market has over-corrected,” Adeduntan said, adding, “It’s priced
in all the negative information. For us, it can only go up.”
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