CBN sacks First Bank, Holdco’s boards, reinstates Adeduntan

In a shocking response to the removal of First Bank managing director, Sola Adeduntan, by its board, the Central Bank of Nigeria (CBN) has, with immediate effect dissolved the board of the bank and directed the removal of all the directors. It also reinstated Adeduntan as the CEO.

The CBN rather announced a new team for the bank, including those for the First Bank Holding Company.

For the Holdco, the new board includes: Remi Babalola, as chairman, UK Eke as managing director. Fatade Abiodun Oluwole, Kofo Dosekun, Remi Lasaki, Alimi Abdulrasaq, Ahmed Modibbo, Khalifa Imam, and Sir Peter Aliogo are members.

For the bank, Tunde Hassan-Odukale is now to serve as the chairman, Sola Adeduntan is back as the managing director, Gbenga Shobo is the deputy managing director, Remi Oni serves as executive director, Abdullahi Ibrahim as executive director.

Tokunbo Martins, Uche Nwokedi, Adekunle Sonola, Isioma Ogodazi, Ebenezer Olufowose and Ishaya Elijah B. Dodo are members.

On Wednesday, the Board of Directors of First Bank of Nigeria Limited announced that it had appointed Gbenga Shobo as its MD/CEO) in a statement endorsed by the bank’s chairman, Ibukun Awosika.

The CBN consequently queried the bank’s Board for the removal of Adeduntan without the regulator’s approval, claiming that the 10-year tenure of Adedutan was yet to expire and that there were no reports of any misconduct to necessitate his removal.

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CBN governor, Godwin Emefiele, who announced the new decision Thursday evening in Abuja, lamented insider abuses that nearly crumbled the oldest bank in Nigeria.

Emefiele said the CEO was removed without due notice to the regulators.

FBN is one of the systemically important banks in the Nigerian banking sector given its historical significance, balance sheet size, large customer base and high level of interconnectedness with other financial service providers, amongst others. By our last assessment, FBN has over 31m customers, with deposit base of N4.2trn, shareholders’ funds of N618bn and NIBSS instant payment (NIP) processing capacity of 22% of the industry.

“To us at the CBN, not only is it imperative to protect the minority shareholders, that have no voice to air their views, also important, is the protection of the over 31m customers of the bank who see FBN as a safe haven for their hard-earned savings,” Emefiele explained during the press meeting.

Emefiele also announced that the forbearance which the CBN had given the first bank in the last five years to enable it clean its books has ended with immediate effect.

He explained that the bank maintained healthy operations up until 2016 financial year when the CBN’s target examination revealed that the bank was in grave financial condition with its capital adequacy ratio (CAR) and non-performing loans ratio (NPL) substantially breaching acceptable prudential standards.

He attributed the challenges at the bank to bad credit decisions, significant and non-performing insider loans and poor corporate governance practices.

He said the shareholders of the bank and FBN Holding also lacked the capacity to recapitalize the bank to minimum requirements. This conclusion arose from various entreaties by the CBN to them to recapitalize.

According to him, CBN stepped in to stabilize the bank in its quest to maintain financial stability, especially given FBN’s systemic importance as enumerated earlier. Regulatory action taken by the CBN in this regard included: “Change of management team under the CBN’s supervision with the appointment of a new Managing Director/ Chief Executive Office in January 2016; Grant of the regulatory forbearances to enable the bank work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years; Grant of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions; as well as Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.”

The governor further explained that these measures had yielded the expected results as the financial condition of the bank improved progressively between 2016 when the forbearance was initially granted to the current financial year.

“For instance, profitability, liquidity and CAR improved whilst NPL reduced significantly,” he said.

But despite the significant improvement in the bank’s financial condition with positive trajectory of financial soundness indicators, the insider related facilities remained problematic.

“The insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank.

“The CBN’s recent target examination as at December 31, 2020, revealed that insider loans were materially non-compliant with restructure terms (e.g. non-perfection of lien on shares/collateral arrangements) for over 3 years despite several regulatory reminders.

“The bank has not also divested its non-permissible holdings in non-financial entities in line with regulatory directives,” the governor further explained.

He said following further review of the situation and in order to preserve the stability of the bank, so as to protect minority shareholders and depositors, the Management of the CBN in line with its powers under BOFIA 2020 approved those decisions.

Emefiele, however, reassured the depositors, creditors and other stakeholders of CBN’s commitment to ensure the stability of the financial system.

“There is, therefore, no cause for panic,” he stated.

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