First Bank, still as strong as the elephant

First Bank is as strong as a bank can get and there was never any reasonable threat to the financial system, analysts insisted last night.

First Bank, Nigeria’s third largest lender, has about one and a half trillion naira camped or sterilised with the Central Bank of Nigeria (CBN) by way of a mandatory Cash Reserve Ratio (CRR), plus it has a Cash Adequacy Ratio (CAR) of around 14.75 percent and a solid liquidity position despite a huge exposure to two small Nigerian banks.

All these indicators, analysts say, help to make the point that First Bank remains the reliable intermediary that Nigerians have all come to know and appreciate over the last 127 years.

Like everything made by man, last week First Bank became the subject of gossip across Nigeria and abroad for the wrong reasons.

An attempt by a well constituted board of the bank to appoint a new leadership to champion the bank’s journey in a new direction, was spurned by the regulator.

In the process, two First Bank boards were sacked in a swift action that has occasioned a significant share price drop and anxiety among international partners who have been calling to seek assurances.

According to analysts and governance experts, in the heat of the fallout, many forgot that in 2019, the leadership of the bank crafted a succession plan which was signed off on by the Managing Director and approved by the board.

A source close to the bank told our reporters, “Whatever anyone might be saying today, the board of First Bank did not just plunge into the aborted succession. This action was well thought through even if some now ask the question why is it that the board did not delay the implementation of the plan till later in the year to allow the CEO to go quietly.”

First Bank’s latest woes began more than six years ago largely on account of a more than $750 million credit to Trans-Atlantic Energy, which went belly up. There were also other failing loans but with the help of the regulator, provisioning for the non-performing loans was stretched under a forbearance given by the apex bank.

BusinessDay learnt that the Trans-Atlantic Energy matter is now near resolution with AMCON which has a mandate to buy bad loans from banks. First Bank and AMCON are said to be weeks away from a deal under which AMCON is expected to agree to the haircut that the First Bank must suffer and thereafter, the negotiated value of the credit will be written to the profit of the bank.

Even the controversial credit given to Honeywell is being paid down as our reporters found that the sum of N20 billion or about a third of the subsisting amount was paid back in the last two years.

Then enter Sola Adedutan, the bank’s CEO who is at the centre of the current storm. He has been a key hand working with the board to address the crisis that shook the bank just before his ascension to the position of CEO. A well respected professional, Adedutan had served at the old Arthur Andersen before going to the UK for further studies. On his return to Nigeria, he joined African Finance Corporation as CFO. While in that position, Adedutan had a chance meeting with the chairman of First Bank’s holding company and when the position of CFO at First Bank became vacant, it was Oba Otudeko who made sure he joined in the race to take the First Bank CFO job.

Adedutan later became CEO after coming top in a talent search handled for First Bank by a South African firm. It is unclear how the relationship between the CEO and the chair of the HoldCo was ruptured.

BusinessDay learnt that at the tense board meeting on Wednesday, a report from the governance committee proposing a change of leadership, was approved by the board and four directors were appointed to brief Adedutan that not only would he not be given a rare third term as CEO he will also be asked to leave the bank before his second three-year term would run out on December 31, 2021. At that meeting where the bad news was broken, Adedutan is said to have been quite calm and it was as if he foresaw the immediate reprieve from the regulators.

Several frantic phone calls were made to save the situation or slow it down. The bank’s erstwhile chairperson Ibokun Awosika was meant to be the other party at the end of one of the calls which came while she was still meeting with the directors of the bank. She would not normally look at her phone during a board meeting and this time there was no way to know who was calling her because she could not associate the number showing on her phone to the central bank governor who has himself admitted to trying to reach her.

And even when one of the executive directors brought his own into the meeting (at a point the executive directors were excused from the meeting) Awosika thought he was showing her a missed call and had no way of knowing that the governor was still waiting on the phone to speak with her.

After the tsunami, there remain two questions begging for answers. Why did the board not tarry till later in the year to effect the leadership change and secondly, why did the regulator overturn in such a dramatic way, a decision made by a properly constituted board of a bank that is not in distress!