First Bank is still swaying under the effects of the attempted change in leadership and the intervention of the Central Bank of Nigeria (CBN). Shareholders and other stakeholders criticized what they saw as a serious breach of corporate governance best practices and called for a stricter scrutiny of insider credit. Deputy Group Business Editor Taofik Salako Reports
The capital market is used to a seamless tradition of corporate change. The hallmark of a rated company in relation to corporate governance is the preventive planning and disclosure of normal or habitual company changes. These normal changes include, but are not limited to, material changes in capital structure, ownership, management, governance and business plans. The market had seen quite a few leadership changes at publicly traded companies in the recent past and all were based on the best practice of the Market Notice of Resignation or Resignation, a transition period, and updates on management change issues. From SEPLAT Petroleum Development Company to May & Baker Nigeria, Union Bank of Nigeria and Continental Reinsurance, there have been traditional changes in the Chief Executive. Airtel Africa Plc also announced a change in leadership last week.
The sudden announcement of the dismissal of the managing director of First Bank of Nigeria (FBN), the flagship of FBN Holdings Plc, Dr. Adesola Adeduntan, and the promotion of Former Deputy Managing Director Gbenga Shobo to Chief Executive on Wednesday April 28, 2021 sent a shock wave through the market. FBN Holdings, its flagship First Bank of Nigeria, is one of the top corporate governance companies. The designation CG + listed on the Premium Board of the Nigerian Exchange (NGX) Limited after the trading symbol of FBN Holdings signals the best corporate governance to investors. No one seemed to see the sudden announcement except for the directors, who were engrossed in intrigue in the boardroom.
Re-election and retirement
On Tuesday, April 27, Adeduntan was duly re-elected as a director along with other directors at FBN Holdings’ annual general meeting. The regulatory filing informing the stock market of Adeduntan’s re-election at the meeting was filed on Wednesday and signed by FBN Holdings corporate secretary Seye Kosoko. Within a moment another regulatory filing, signed by Kosoko, surfaced that same Wednesday announcing the replacement of Adeduntan and the appointment of Shobo effective the same Wednesday, April 28th, when Adeduntan retired and sought one Develop a sense of the process. Adeduntan retired after successfully running the bank since January 2016.
None of the stockholders ‘leaders and proxies chosen to represent the stockholders’ blocs due to COVID-19 restrictions had any hint of “retirement,” and nothing was discussed about it at the general meeting, the highest governing body of a company, the day before . The market seemed to smell the brewing crisis at Nigeria’s oldest and systemically important bank. The investing public was surprised. At the end of trading on Wednesday, FBN Holdings had total sales of 69.5 million shares, compared to an average of around 18 million shares in the last four trading sessions.
The sudden announcement did not hit the Central Bank of Nigeria (CBN) either. Banks and other financial services institutions are required by law to file appropriate reports and obtain approval from their primary regulatory authorities before announcing changes that have a material impact. Apex Bank immediately questioned the bank’s board of directors. When FBN’s share price began a free fall on Thursday, April 29, 2021 and the supply of shares on the stock market piled up, Apex Bank acted quickly and dissolved the Dr. Oba Otudeko led the board of directors of FBN Holdings and Ms. Ibukun Awosika. led the Board of Directors of First Bank of Nigeria. However, FBN’s share price fell 6.76 percent from its opening value of N7.40, closing Thursday at N6.90 per share.
CBN Governor Godwin Emefiele said at a news conference that Apex Bank had acted in accordance with its mandate and powers under the Banks and Other Financial Institutions Act (BOFIA) 2020 to protect the banking system, customers and investors. Apex Bank Remi Babalola as the chairman of the new board of directors of FBN Holdings, the Dr. Fatade Abiodun Oluwole, Kofo Dosekun, Remi Lasaki, Dr. Alimi Abdulrasaq, Ahmed Modibbo, Khalifa Imam and Sir Peter Aliogo. UK Eke was retained as managing director.
Apex Bank also appointed Mr. Tunde Hassan-Odukale as Chairman of the new Board of Directors of First Bank of Nigeria Limited, which also included Tokunbo Martins, Uche Nwokedi, Adekunle Sonola, Isioma Ogodazi, Ebenezer Olufowose and Ishaya Elijah Dodo. Dr. Adesola Adeduntan was reappointed managing director, while Remi Oni and Abdullahi Ibrahim were appointed managing directors. Mr. Gbenga Shobo has been returned to his previous position as Deputy General Manager.
What accelerated change?
Most shareholders and other stakeholders suggested that the sudden change may not have been linked to intrigue in the boardroom over insider credit. Apex Bank has also deliberately placed bad insider credit and bad corporate governance at the heart of the bank’s problems. Unlike many instances where the investing public had used the CBN to intervene in listed banks, there was almost consensus that Apex Bank’s immediate actions were in the greater interests of the bank and its shareholders.
Globalview Capital Limited’s managing director, Aruna Kebira, a stockbroker and trader chartered on NGX, described the attempted change in leadership as “akin to the proverbial ostrich who stuck his head in the sand for an escape.”
“The market has watched the bank have been bullied and held down over the years by non-performing loans (NPL), which cut what was once a giant elephant like a minnow. The bank has set aside provisions for bad loans that can be used to borrow more than five other banks with a minimum capitalization of N25 billion, ”said Kebira.
According to him, if the board overseeing the burgeoning bad credit wanted to do even more damage to the bank, the CBN, as the apex regulator of the banking sector, was right to put aside all burdens to bail out the bank.
“We all know that the premature dismissal of the managing director last Wednesday took place without recourse to CBN and in a flagrant mode,” said Kebira.
Kebira, a certified investment analyst, said restoring the boards of FBN Holdings and FBN could further increase market confidence in the companies.
“Over the years, FBN has turned ordinary investors into millionaires, and it remains one of the most liquid stocks on the stock market. If it can get back at least 50 percent of the loans written off, then its price has no business trade below N10. It can only take a while; The bank’s old glory is on its way back, ”said Kebira.
The President of the Association for the Promotion of the Rights of Nigerian Shareholders (AARNS), Dr. Faruk Umar also said the decision to appoint a director and publicize the appointment without CBN’s approval is not in accordance with CBN’s corporate governance rules. which the board led by Otudeko was fully aware of.
He said Apex Bank had powers to remove the boards of directors from FBN Holdings and FBN. According to him, the CBN has powers to remove the directors of a financial institution to which it has licensed, and both FBN Holdings and FBN have been licensed by CBN.
Umar said Apex Bank should discourage directors and their companies from borrowing from the banks they have on their boards.
“Any creditworthy bank director should borrow from another bank,” said Umar.
He was also optimistic that restoring the institutions’ boards of directors will ultimately benefit shareholders, noting that while the initial reaction of investors may result in a depreciation in the share price, the bank will be more profitable over the next five to six quarters becomes.
“CBN should make sure that what happened at First Bank never happens in another bank. A critical analysis of all insider credit from bank directors needs to be done immediately, ”said Umar.
A stockholder leader who coordinates the legal group of shareholders in predominantly southwestern states also threw weight behind Apex Bank, noting that what Apex Bank was doing was “all right”.
The shareholder leader, longing for anonymity, also called for a closer look at directors’ loans and for stricter credit risk measures to be enforced on insider lending.
According to him, while there is nothing wrong with a director getting a loan from his bank, there should be more disclosures and regulations for such a practice.
He said while the crisis could have a negative impact on the stock price as investors react negatively, discerning investors would soon see the benefits of intervention and end any panic selling.
“This decision is not the best, and it is inconsistent with the world’s global corporate governance practices, as some of the pillars of corporate governance are legal rules, moral integrity, and transparency. Whatever is short has a detrimental effect on our existence as an institution. The turnover rate of the CEOs of our bank has been very high in recent years, ”said the shareholder leader, criticizing the decision to remove Adeduntan, noting that there was no“ allegation against his leadership ”.
The national coordinator of the Pragmatic Shareholder Association of Nigeria, Ms. Bisi Bakare, said the dismissed boards of directors of FBN Holdings and FBN acted in bad faith and in gross violations of all existing corporate governance codes. Bakare, one of the proxies representing the shareholders’ blocks at the AGM, said there was no sign of any change at the AGM.
“The decision of the board of directors was very bad and inappropriate. Why should the board of directors urge Mr. Sola Adeduntan to resign when he is still eight months from retirement? That is completely against the Corporate Governance Code. The CBN was right in deciding to sanction the board members and reinstate Adeduntan as this is the duty of Apex Bank. to protect all stakeholders who are depositors, employees and investors, ”said Bakare.
She also called for a stricter regulatory framework on insider lending, noting that bank directors have been known to deliberately badge their loans to harm and write them off.
“Some of these directors knew from the day the loans were made to them that they would not repay the loans,” Bakare said.
She said the crisis may not have a major impact on First Bank’s performance with all executives still on board.
While the storms seemed calmed down by the storm of approval of the CBN’s actions and the resumption of the affable Adeduntan, the coming period contains many important decisions for FBN Holdings and FBN, especially given Apex Bank’s renewed focus on insider credit and the Compliance with Existing Loans Banking Regulations for Investing in Non-Bank Business.