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Moody’s Fears First Bank Financial Health Could be at Risk

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By Dipo Olowookere

There is every possibility that the financial health (solvency) of First Bank of Nigeria Limited, the flagship subsidiary of FBN Holdings Plc, could be at risk, Moody’s Investors Service has feared.

The rating agency in a report on Wednesday also said the management team of the bank could find it difficult to focus on implementing the company’s strategic plan.

First Bank has been in the news recently following the botched boardroom coup that initially ousted its Managing Director, Mr Adesola Adeduntan.

The Veterinary Doctor turned banker was removed from office by the board of the organisation formerly led by Mrs Ibukun Awosika and was replaced by his deputy, Mr Gbenga Shobo.

However, the Central Bank of Nigeria (CBN), the primary regulatory agency for the banking sector in the country, restored him and sacked the board as well as that of its parent company led by renowned businessman, Mr Oba Otudeko.

The apex bank revealed that it took the action to protect the interest of depositors, minority shareholders and others, revealing that it had been supporting the lender with funds in the past so as not to allow it to crash.

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It was alleged that First Bank had been granting loans to its directors, especially to Mr Otudeko and one of his companies, Honeywell Flour Mills, without clears ways of recovering them, though this was denied.

As a result of the board crisis shaking the banking institution, Moody’s said it has placed all long-term ratings and assessments of First Bank on review for downgrade.

The agency said the action of the CBN on the bank clearly showed “corporate governance shortcomings and weaknesses in board oversight.”

Moody’s noted that though the management team has been restored, the crisis “could distract management’s focus on implementing the bank’s strategic plan and the road to recovery,” pointing out that the development was also likely to sway “investor confidence.”

“In addition, the rating agency notes First Bank’s relatively low proportion of provisions to its NPLs (non-performing loans), at just about 40 per cent, which puts its solvency at some risk in case higher loan-losses materialise than previously expected.”

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The management team led by Mr Adeduntan worked tirelessly to reduce the NPL ratio of the financial institution from 25.9 per cent in 2018 to 7.7 per cent at year-end 2020 and this has been commended by several observers and analysts.

But the rating firm noted that First Bank “needs to implement regulatory directives concerning the resolutions of loans to and shareholding in non-banking related parties, which reportedly had not been executed in the recent past.”

It said the review for downgrade of First Bank rating will focus on its “ability to address the shortcomings highlighted by the regulator as concerns its governance and risk procedures, among others, the management of its loan portfolio to related parties.”

Moody’s stated in the statement sighted by Business Post that it would “monitor any further corrective actions that the regulator may require.”

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“Moody’s will also assess the likely impact of these changes on the bank’s risk governance, its solvency level and its on-going efforts to reduce the bank’s stock of NPLs,” it added.

It disclosed that, “The bank’s long-term deposit ratings could be downgraded if deficiencies in the governance structures of the bank persist and if there is any further sanctioning of the bank by the CBN, including but not limited to requirements to take corrective measures of any weaknesses that could be uncovered. Weaker financial performance than expected could also lead to a downgrade of the ratings.”

“There is limited likelihood that First Bank’s ratings could be upgraded given the review for downgrade and the negative outlook on the government of Nigeria, its support provider in case of need,” adding that “stronger solvency improvements than what is currently captured in the ratings, together with a stabilisation of the sovereign outlook, could lead to stabilisation of the outlook.”

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Banking

CBN’s Digital Currency Will Deepen Financial Inclusion—FDC

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Summon CBN Governor

By Adedapo Adesanya

Financial Derivatives Company (FDC) Limited has lauded the proposed plan by the Central Bank of Nigeria (CBN) to introduce a digital currency, saying it will deepen financial inclusion in the country.

In a new report, FDC explained that most central banks had indicated keen interests in developing their digital currencies in response to the threats and limitations of cryptocurrency, including poor regulation, price volatility and facilitating illicit financial transactions.

The report said, “Nigeria is set to follow the global trend as it plans to launch its digital currency by year-end. Unlike crypto, digital currencies are regulated by central banks, thus giving them some level of control over the financial system.

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“On a positive note, virtual currencies would facilitate smooth financial transactions and eliminate bottlenecks associated with the use of cash (mutilated notes, forgery, cash handling charges, shortages). It will also deepen financial inclusion and increase the velocity of circulation.”

The analysis highlighted the rising concerns of distrust in the government and its policies, cybersecurity and inadequate digital infrastructure.

“All these could limit the launch and widespread use of the digital currency in the country,” it said.

According to the report, the drop in inflation rate in May for the second straight month contradicts market reality following the report by the National Bureau of Statistics (NBS) which disclosed that the country’s inflation rate fell to 17.93 per cent in May from 18.12 per cent in April.

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FDC said contrary to analyst expectations, the decline in consumer price inflation seemed to be more of a trend than a blip.

It said the headline inflation fell again in May primarily due to a fall in the food sub-index to 22.28 per cent from 22.72 per cent in April.

This is coming as the CBN last year issued a circular asking commercial banks and other financial institutions to close accounts transacting in, or operating on, cryptocurrency exchanges.

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All deals involving cryptocurrency are now prohibited with severe regulatory sanctions awaiting erring outfits.

The apex bank also asked commercial banks to identify persons and or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.

But since the apex bank announced its intention to introduce a digital currency for the country, it has been applauded.

Apart from the FDC, other analysts have submitted that the proposed CBN’s digital currency would benefit the nation, especially as the digital asset is becoming widely accepted across the globe.

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Banking

CIBN to Revamp Banking Practice in Nigeria With A-TEAM Initiative

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CIBN A-TEAM Initiative

By Aduragbemi Omiyale

A strategic initiative aimed to revamp banking practice in Nigeria has been introduced by the Chartered Institute of Bankers of Nigeria (CIBN).

The new plan with the acronym A-TEAM means Accelerated Development; Technology and Digital Enhancement; Engagement for Growth; Accountability and Transparent Leadership and Membership Drive for Value.

As part of efforts for its successful implementation, the CIBN is seeking collaborations with financial institutions in the country.

Recently, the President/Chairman of Council, CIBN, Mr Bayo Olugbemi, visited Ecobank Nigeria and he said the A-TEAM initiative will benefit stakeholders in the banking sector.

He applauded Ecobank’s consistent support for the institute over the years to ensure the realisation of its mandate of determining the standards of knowledge and skills development for those seeking to become members of the banking profession.

“We applaud Ecobank Academy as the first corporate member to become a member of the Global Business School Network and for the consistent support for the realisation of the institute’s mandate of determining the standards of knowledge and skills to be attained by persons seeking to become members of the banking profession.

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“We, therefore, seek Ecobank’s collaboration and enlistment in our Endowment/Prize Awards in any subject of interest; support towards the renovation of Abuja Bankers’ House; support for the establishment of banking museum by donating artefacts and other relevant materials; and to participate actively in training programmes of the institute,” Mr Olugbemi said.

Further, he congratulated Ecobank Nigeria and the Ecobank Group on winning several International awards, which includes the Best Retail Bank in Nigeria by Asian Banker; Africa’s Best Bank for Corporate Responsibility by Euromoney (Ecobank Group); African Bank of the Year (African Banker); Innovation in Financial Services Award from African Banker (Ecobank Group); EMEA Finance African Banking Awards 2020.

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Responding, the Managing Director of Ecobank Nigeria, Mr Patrick Akinwuntan, pledged more support and collaboration with the institute, restating that Ecobank will continue to contribute to the efforts of the organisation to become top class and remain relevant globally.

“For us at Ecobank, we are extremely proud CIBNs efforts at ensuring public discourse on the future of the Nigeria economy and the banking and finance industry.

“This is not in isolation of the ethics, professionalism, accountability, transparency, good corporate governance without losing focus of harnessing the opportunities technology has provided in the new world order. Be assured of our maximum support and collaboration at all times,” he said.

Mr Akinwuntan also identified with the efforts of the institute to raise the bar of competency and capacity building in the industry, stressing that with sound professional conduct, every banker will be held in high esteem.

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He said Ecobank was working assiduously to ensure a majority of its staff become members of the institute, adding that the bank will also provide more mentees and mentors in its mentorship programme.

“We have a medium to long term programme to ensure all Ecobank Nigeria staff become chartered members of the institute.

“At Ecobank, we take human capacity development very seriously. Some of our staff that wrote the last examinations are now chartered members of the Institute.

“We will also ensure bulk subscription of our staff. We will be nominating 30 mentors and 100 mentees to participate in the second mentorship programme,” he assured.

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Banking

VBank Brightens Spirits at Lagos NYSC Orientation Camp

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VBank NYSC Orientation Camp

By Modupe Gbadeyanka

The National Youth Service Corps (NYSC) orientation camp in Lagos was recently brightened by VFD Microfinance Bank, owners of the 2020 banking app of the year, VBank.

The financial institution, for 10 days, entertained corps members and officials alike at their Games Veelage, an arcade set up with interesting games including snooker, Jenga, fuss ball, chess, scrabble, snakes & ladders and video games.

At the climax last Sunday, 15 NYSC members won N150,000 in cash prizes, while others received loads of consolation gifts.

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Dayo Osborne, Gbenga Benedict, Olamide Ojedele, and Joseph Eweje were some of the winners of the N20,000 cash prize category and were rewarded instantly via transfer from the digital banking app, VBank.

While onboarding the graduates on the banking platform, the brand created an avenue for the Batch A Stream 2A corps members to relax after their usual daily camp routine.

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The bank had equally sponsored the inter-platoon games night which took place days before, gifting participants cash transfers using the app’s Proximity Payment feature.

According to Ebere Ahaotu, Product Manager, VBank, “It is our little way of encouraging young people to keep hope alive.

“Camp life can be hectic and VBank is all about ease and convenience so why not brighten up their camp experience, introduce them to a better way to bank and assist them with some funds to transport them to their places of primary assignment. It’s about paying it forward.”

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The corps members have since been posted to different places of assignment within the state while another stream gets ready for camp in July.

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