S&P Global Ratings yesterday said changes to the boards of FirstBank of Nigeria and FBN Holdings PLC (FBNH), recently directed by Central Bank of Nigeria (CBN), addressed the banking group’s corporate governance challenges and ensures the Nigerian banking sector’s financial stability.
In a statement yesterday, it stated that its ratings on FBN and other Nigerian banks remain constrained by shortcomings in corporate governance and transparency, among other factors.
The CBN recently replaced the entire boards of FBN and FBNH, and reinstated the former executive directors and CEO, Dr. Adesola Adeduntan.
The CBN had also requested FBN unwind certain exposures and divest from its participation in a non-permissible company, also pointing to potential corporate governance lapses at the bank.
“However, Dr Adeduntan’s reinstatement and the re-appointment of the other executive directors underscores the CBN’s confidence in the existing management team to continue the turnaround of the third-largest banking group in Nigeria, which has total assets of Nigerian N7.7 trillion.
“We are of the view that the CBN’s historical approach has been more reactive than proactive, as illustrated by the Skye Bank episode. That said, recent actions, while disruptive in the near-term, may signal a more direct and possibly decisive supervisory approach to alleged failings in the management and governance of regulated institutions,” it stated.
It, noted that FBN’s overall credit profile has gradually stabilised since 2016, with a capital adequacy ratio of 17 per cent in 2020, as against a 15 per cent minimum requirement.
Similarly, the bank’s asset quality indicators improved significantly, with nonperforming loans (NPLs) reducing to 7.7 per cent in 2020, from 20-25 per cent since 2016.
