FBN Holdings Plc, parent company of First Bank Nigeria Limited, is planning to downsize 1000 workers and place less focus on providing loans to the oil industry in a bid to reverse the profit slump it experienced in 2015.
The lender expects to boost its return on equity, to between 11 per cent and 14 per cent in 2016 from last year’s “really bad” figure of 3 per cent, according to the Chief Executive Officer of First Bank of Nigeria Limited, Mr. Adesola Adeduntan.
He said the company was also targeting a cost-to-income ratio of 55 per cent in two years time from 59 per cent.
“At a minimum, we should triple it. We do not shy away from taking difficult decisions. We used to have above 8,000 people. We’ll push it down, gradually to 7,000,” he added.
FBN’s profit fell to N15bn ($76m) from N84bn in 2014, amid a crash in the price of crude, the biggest source of Federal Government revenue and export earnings.
Growth decelerated to 2.8 per cent in 2015, the lowest level since 1999, and may worsen to 2.3 per cent this year, according to the International Monetary Fund.
First Bank’s non-performing loans ratio stood at 22 per cent at the end of March, compared with 3.8 per cent a year earlier. Reducing that figure is the “number one priority,” said Adeduntan.
He said the bank would do that by reducing the proportion of its lending to the oil and gas sector, currently at about 39 per cent of total loans, and focusing more on blue-chip companies in other industries.
Adeduntan ruled out any equity raising this year, saying the bank’s capital adequacy ratio of 17.2 per cent was enough of a buffer and above the Central Bank of Nigeria’s minimum requirement of 15 per cent.
It would still be adequate if the floor is raised to 16 per cent in July for Systemically Important Institutions, including First Bank.
“We continuously evaluate it and the position now is that there’s no need for external capital,” Adeduntan, 46, who became the CEO in January after joining First Bank as chief financial officer in mid-2014, said.
“We generate enough internal capital,” he said. FBN’s shares rose by 5.3 per cent to N3.57 on Wednesday. They are, however, still down 30 per cent this year, more than the Nigerian Stock Exchange All Share Index’s drop of 13 per cent.
“The market has over-corrected,” Adeduntan said, adding, “It’s priced in all the negative information. For us, it can only go up.”