FBN Holdings Passes Fitch’s Test On Corporate Governance, Capitalisation

The Nnamdi Okonkwo-led First Bank Holdings, FBNH has taken bold steps to address the corporate governance problems and insider abuse raised against the first-generation bank last year by the Central Bank of Nigeria, CBN.

The global rating firm, Fitch Ratings disclosed this in its report released last weekend. The agency which upgraded FBNH and its subsidiary, First Bank Limited, FBNL to ‘B’ from ‘B-‘ said the Holder has significantly tackled the issue of capitalization and disposed of all toxic credit left by the previous management.

Fitch has therefore assigned stable outlooks on FBNH and FBNL aside from upgrading their viability ratings, VR to ‘b’ from ‘b-‘.

Financial analysts insist that the ratings will further boost stakeholders’ confidence in the bank as its consolidates on the gains it has recorded in the last few months as one of the nation’s top three banks.

The rating agency said in a statement that the upgrade of the long-term IDRs followed that of the VRs, indicating that the management of the financial giant has significantly resolved corporate governance issues and that bold steps have been taken to generate more capital.

The renowned rating firm said in the statement, “Fitch has withdrawn FBNH’s and FBN’s Support Ratings and Support Rating Floors as they are no longer relevant to the agency’s coverage following the publication of its updated Bank Rating Criteria on November 12, 2021.

“In line with the updated criteria, we have assigned Government Support Ratings (GSR) of ‘no support’ (ns) to both issuers.

“FBNH is a non-operating bank holding company. Its VR is equalised with the group VR, derived from the consolidated risk assessment of the group, due to the absence of double leverage and high fungibility of capital and liquidity.

“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.

“FBN is the third-largest bank in Nigeria, representing 11 percent of domestic banking-system assets at end-2021. A strong franchise supports a stable funding profile and a low cost of funding.

“Revenue diversification is strong, with non-interest income representing 48 percent of operating income in 2021,” Fitch said.

Recall that the former management board of the bank was sacked by the apex bank in April 2021 after serious allegations of insider abuse and huge loan exposures allegation were raised against some of its members.