Among many executive positions in an organisation, the Chief Financial Officer (CFO) is sometimes considered to be one of the most strategic, and rightly so. When the firm in question is an operator in the financial services sector, then the office becomes even more critical to be thrown to just anyone.
Besides being responsible for fiscal operating results, the CFO is the senior executive directly responsible for managing the financial strategy, decision and actions of a company. He tracks cash flow, analyses the company’s financial strengths and weaknesses, and fill in for the lapses, reducing operations costs and increasing income.
In other words, we can say that the job of the CFO is to ensure that the company is highly profitable so that no matter how high it’s share price might be, if listed on the floor of the Nigerian Stock Exchange, it would still be termed undervalued.
This article looks at the CFOs in Nigeria’s tier one banks, their profiles, their last 3 years records and projections for 2020.
Ugo Nwaghodoh, Group CFO, United Bank for Africa Plc (UBA)
Ugo is a seasoned financial analyst and accountant with experience spanning assurance, advisory, financial control, financial modelling & programming, strategy and business transformation, investor relations, corporate restructuring, risk management, mergers & acquisition, business integration and project management.
He has been the Group CFO at United Bank for Africa Plc since 2011, managing the performance, financial control, portfolio investment and investor relations among others. Before then he was the Divisional Head, Financial Control and Investor Relations between 2008 and 2011.
He also had a brief stint as Group Chief Compliance Officer, and as Head of Special Project (Corporate Mergers). He was Head, Performance Management, Strategy and Business Transformation for about 3 years, where he drove the cost optimization initiatives of the bank, and engaged in policy formulation.
Before UBA, he had worked as Manager, Assurance and Business Advisory Services with PriceWaterhouseCoopers Nigeria for 8 years, and 2 years in Kenya on secondment.
He has a degree in Accounting and Finance, and MSc in Finance & Management from the Cranfield School of Management, Cranfield University.
He is a fellow, Institute of Chartered Accountants of Nigeria (FCA).
His last 3 years performance
UBA, under Nwaghodoh’s watch, had a fairly unfavourable 2018 as cost to income ratio increased from 57.8% in 2017 to 64% in 2018, and profit after tax almost remained the same increasing only slightly from N78.59 billion in 2017 to N78.60 billion in 2018.
The bank, however, staged a comeback in 2019 with cost to income ratio reduced to 62.7% while profit after tax increased by over N10 billion to N89.08 billion.
Share price however declined from N10.3 in 2017 to N7.7 in 2018 and N7.15 in 2019, probably not Nwaghodoh’s fault though, since this happened across most financial services institutions. In addition, the bank also paid N30 million as fine to the CBN in 2018, a situation which led shareholders to cry out to Apex bank for what was termed ‘unfair penalties’.
Nwaghodoh, however, has a beautifully designed investor relations page to his credit, with answers to Investors FAQs, analysts reports and credit ratings for the bank, shareholders information and news among others.
Oluseyi Kumapayi, CFO Access Bank Plc
Kumapayi joined Access Bank in 2002. Before then, he was with the First City Monument Bank (FCMB) where he served as Financial officer.
Kumapayi got his MBA from the Kellogg school of management, Northwestern University, and has been severally endorsed in Corporate finance, risk management and business strategy, financial analysis, mergers and acquisitions, financial modelling and investment banking.
He also attended the INSEAD course on Risk Management, London Business School (LBS) High Performance People Skills program, Euromoney, Assets and Liability Management, Strategy Master Class and Mergers and Acquisition. He is a Certified Chartered Accountant.
Now let’s look at the bank’s three years performance under Kumapayi.
For the cost to income ratio, Access bank has remained profitable over the last three years, but now the question would be how profitable?
Cost to income ratio reduced from 72.40% in 2017 to 65.30% in 2018 showing that the bank’s strategies succeeded in reducing the ratio of cost to income and making more profits. However, 2019 recorded a negative progression to 68.7%.
This is in spite of the fact that profit after tax grew significantly to N97.5 billion in 2019, from N94.98 billion in 2018 and N53.6billion in 2017.
Overall, we can say the indices point to greater progress made in 2018, compared to 2019.
Note also that the merger between Access Bank and Diamond bank started in 2018, running through 2019 before it was eventually sealed with the launching of the new Access logo, and the slogan ‘access more’. The role of a CFO in a merger of this magnitude is ourightly priceless, given that not all merger talks result in a successful merger of assets, shareholders, and even management team.
There is also the acquistion of controlling equity interest in Transnational Bank Kenya Plc, which Access Bank undertook in October 2019.
Share price at last day of the year progressed from N10.45 to N6.8 to N10, showing that share price dropped most in 2018, which interestingly happened to be the most profitable year so far. In the same 2018, Access bank paid N20 million in fines to the Central Bank of Nigeria.
Kumapayi has kept the investor relations page of the bank’s website duly updated with annual financial reports, investor news, credit ratings, upcoming events, shareholders information and news.
Oyewale Ariyibi, CFO, First bank of Nigeria Plc
Before becoming Chief Financial Officer at FBN Holdings Plc, Oyewale Ariyibi had worked with Transnational Corporation of Nigeria Plc (Transcorp) as Chief Finance Officer, and at Standard Chartered Bank, Nigeria as Country Financial Controller.
He has a cumulative 23 years experience in banking and financial services, business assurance, tax management, business process review and consulting across several institutions.
He has been certified in areas such as capital raising, tax planning and cost management, operational risk management, strategic and corporate planning, compliance and business assurance amongst others, and is a Fellow of the Institute of Chartered Accountants of Nigeria (FCA), Associate of the Chartered Institute of Taxation (ACIT) and Certified Pension Institute of Nigeria (ACIP).
So what has he done with First Bank in the last three years?
Profit after tax has been on an increase, from N47.78 billion in 2017 to N59.74 billion in 2018 and N62.09 billion in 2019. This is laudable given that 2016/17 was not the best times for the Nigerian economy.
Share price has however dropped from N8.8 in 2017 to N7.95 in 2018 and N6.15 in 2019.
This may be no fault of his given that he has managed to keep the cost to income ratio stable at 80.17% in 2017, 80.15% in 2018, but it increased slightly in 2019 to 81.31%.
Note that the FBN Holdings also paid a fine of N32.65 million to the CBN in 2018.
This trend can be considered worrisome not only because FBN holdings has the highest cost to income ratio among the tier one banks, but because it is the only of the five banks where cost to income ratio did not reduce over the last 3 years.
This probably explains why shareholders earned 0.25 dividends per share in 2017, 0.26 in 2018 and 0.38 in 2019, the least dividends declared by any of the top banks.
The investors’ relations page of the bank’s site is a bit unclear and it is not easy to access needed information, but once a site visitor gets past the initial confusion, one can see shareholders information, corporate governance reports, financial highlights, unclaimed dividends, press releases and news.
Ariyibi might need to ask some pointers from his colleagues in other tier one banks.
Recently, Ariyibi led engagements with regulators towards FBN’s intention to divest its 65% holdings in FBN insurance Limited.
Mukhtar Adam, CFO Zenith Bank Plc.
Mukhtar Adam was appointed Chief Financial Officer (CFO) of Zenith Bank in 2018, and is currently the Group Head, Financial Control and Strategic Planning Group of the bank.
Before this, he was the bank’s Deputy CFO, and sometime before 2014, he headed the Financial Reporting, Tax Management and Strategic Planning Groups, overseeing the entire Zenith Group’s financial reporting.
Adams worked in Financial Services Group of the Nigerian and Ghanaian practices of PricewaterhouseCoopers (now PwC), as a Senior Consultant, before joining Zenith Bank in 2007.
Adam holds a PhD in Finance from the Leeds Beckett University (UK); M.Sc. (Finance – Financial Sector Management) from University of London’s School of Oriental and African Studies, (UK); MBA (Finance) from the University of Leicester (UK) and B.Ed. Social Sciences (Economics and Management) from the University of Cape Coast (Ghana).
Many feathers for one man’s cap, we must agree!
He also holds a Diploma in International Financial Reporting Standards (IFRS) from the Institute of Chartered Accountants in England and Wales (ICAEW).
He is a member of the Institute of Chartered Accountants of Nigeria (ICAN), Chartered Institute of Taxation of Nigeria (CITN), and Institute of Chartered Accountants of Ghana (ICAG).
So, what has Mukhtar Adam achieved for Zenith bank since he took over from Stanley Amuchie in 2018?
It’s been three progressive years for this tier one bank as cost to income ratio has continued to decline from 52.70 in 2017, to 49.30 in 2018 and further down to 48.8% in 2019. Commendably, this progression is not just a result of cutting down operation costs, but increasing income.
Profit after tax for 2017 stood at N173.79 billion and increased to N193.42 billion in 2018 and spiked further to N208.84 billion in 2019.
Whatever magic wand Adams holds over the bank, it must be working well because among the five tier one banks, Zenith bank has consistently had the highest profit after tax for the past three years.
Share price of the bank also moved from N25.6 in 2017 to N23.05 in 2018 and further down to N18.6 as at last day of 2019.
However, this cannot be counted against him as share price is subject to a whole range of extraneous factors. In the 2018, the bank paid N10 million fine to the CBN.
With his input, the bank also maintains a detailed investors relations page with press releases, credit ratings, corporate governance reports and financial updates. In addition to the BOT which pops up to help guide a visitor through the page and answer inquiries, Adams also appears to be one CFO who spells out his key financial strategies on all aspects of the banks operations, on the investors relations page.
Adebanji Adeniyi, CFO, GT Bank
Adeniyi became CFO of GT bank in 2013.
Adeniyi has been certified competent in risk management, portfolio management, risks and investments, Operational dynamics and Associated Risks among others, and has over two decades of professional experience.
He gained his early experience from notable companies including PricewaterhouseCoopers, and Arthur Andersen (now KPMG).
His banking experience comes from his stint with Lead Bank Plc, and his years at GT Bank. He is a Fellow of Institute of Chartered Accountants (FCA), and also holds a MBA.
So, what has he been up to in the last 3 years.
For Guaranty Trust Bank Plc, cost to income ratio reduced from 38.2% in 2017, to 37.2% in 2018, and to 36.1% in 2019
In addition to its gradual improvement, GT bank has maintained the best cost to income ratio among the top banks.
The bank has also maintained a high profit after tax after Zenith bank. GT Bank recorded N170.47 billion profits after tax in 2017 and this increased to N184.64 billion in 2018 and N196.86 billion in 2019.
Like other banks, however, share price has dropped over the years – from N40.75 in 2017 to N34.45 in 2018 and N29.7 in 2019. In addition to this, GT Bank also received a heavy penalty of N24 million in 2018 from the CBN.
In terms of profitability, both for the bank and for investors, Adeniyi is getting it right.
The bank also has a well laid out investors relations page detailing corporate and financial information, outlooks and insights, upcoming events and investors news, shareholders information and annual reports.
Fidelity Bank to raise N50 billion in bonds in Q4 to refinance existing debts
The new issue will be made to redeem the existing N30 billion bond which was issued at 16.48%.
One of Nigeria’s second-tier commercial banks, Fidelity Bank Plc, has concluded plans to issue up to N50 billion ($131.3 million) in local bonds by the fourth quarter of 2020, in order to refinance existing debts as the yields drop.
The disclosure was made by the Chief Operations and Information Officer, Gbolahan Joshua, during an analyst call on Tuesday, September 8, 2020.
The crash of crude oil price globally, which was triggered by the novel coronavirus pandemic, has led to a decline in bond yields on the local debt market. This has made foreign investors to dump their local assets, leaving excess liquidity in the money market. This has also put a lot of pressure on the foreign exchange market as they look for dollars to repatriate their funds.
The Fidelity Bank top executive disclosed that the new issue will be made to redeem the existing N30 billion bond which was issued at 16.48%.
The global economic situation has seen yields in the debt market drop from as high as 18% about 3 years ago to less than 5% for the one-year treasury bill.
Fidelity Bank had revealed that it expected to see a 15% drop in profit this year when compared to 2019 result due to the coronavirus pandemic. Its profit after tax increased by 21.9% to N12 billion for the half-year 2020.
The second-tier bank also disclosed that its income declined in the second quarter due to a downward review of lending rates on loans as a result of the economic downturn.
Heineken buys more units of Nigerian Breweries Plc
The Dutch firm has invested N276 million in NB since August, to increase its stake in the Brewer by 0.10%.
The major shareholder of the largest brewer in Nigeria, Heineken Brouwerijen B.V, has increased its stake in Nigerian Breweries, with the purchase of 233,110 additional units of Nigerian Breweries shares. This was disclosed by the company in a notification sent to the Nigerian Stock Exchange, which was seen by Nairametrics.
According to the notification, which was signed by the Company’s Secretary, Uaboi G. Agbebaku, the purchase was made on the bourse over two transactions on the 2nd and 3rd of September.
This disclosure is a regulatory requirement that must be reported to the Nigerian Stock Exchange, especially when a major shareholder or director of a publicly quoted company purchases shares in the company they own.
The analysis of these transactions indicates that the purchase consideration for the 233,110 additional units of Nigeria Breweries shares at an average price of N39.94 is put at N9.3 million.
This purchase and previous purchases further cement Heineken Brouwerijen B.V’s status as a major shareholder; the company has accumulated a total of 7,720,236 since 30th June.
As of June 30th, when Nigerian Breweries released its Half-year financial results and reviewed its shareholding pattern, the company had exactly 7,996,902,051 outstanding shares, with Heineken Brouwerijen B.V being the majority shareholder with 3,019,363,804 units, which amount to 37.76% of the total shares of the company outstanding.
Hence, with the current purchase of 233,110 additional units, and previous purchases in August and September 1, which amount to 7,487,126 units, Heineken’s ownership percentage of Nigeria Breweries is now put at 37.85%.
Insider transactions, both sales and purchases, are often an indication of how shareholders perceive a company’s valuation. It could also mean a possible capital raise or that the majority shareholders are strengthening their existing holdings.
In like manners, the purchase of the shares of Nigerian Breweries by Heineken and other majority shareholder has mopped up stray volumes on the bourse, and pushed the stock price higher by 29% or N9, from N31 it closed at on the 3rd of August to its current value of N40 with 38.2x earnings.
About the company
Nigerian breweries is the largest brewing company in Nigeria. It engages in the brewing and marketing of lager beer, stout and non-alcoholic malt drinks, and the bottling of the Schweppes range of soft drinks and Crush Orange. Its brands include Star, Gulder, Legend, Heineken, Maltina, Amstel Malta, Fayrouz, Climax, Goldberg, Malta Gold, and Life. These products are mainly sold in Nigeria and other neighbouring countries.
Key takes on NB’s financials
Nigerian Breweries was affected by the disruption in the global and domestic demand and supply chain, as profit after tax of the largest brewer dropped by as much as 58%, at the back of the adverse impact of the sharp contraction in economic activities.
The knock-on effect of the COVID-19 lockdown, which affected the trade segment of the business, affected the company sales and this triggered the 11% drop in revenue in the first half of the year.
Nestle’s parent company increases stakes in Nestle Nigeria in August
The purchase consideration for the 748,047 additional shares at an average price of N1,174.74 is put at N878.8 million.
Nestle S.A, Switzerland, the parent company of Nestle Nigeria Plc and the majority shareholder of the company, has increased its stake in the Nigerian subsidiary, as it purchased about 748,047 additional shares in August.
This was disclosed by the company in a notification sent to the Nigerian Stock Exchange, which is seen by Nairametrics.
This disclosure is a regulatory requirement which must be reported to the Nigerian Stock Exchange, especially when a major shareholder or director of a publicly quoted company purchases shares in the company they own.
The analysis of this development shows that the purchase consideration for the 748,047 additional shares at an average price of N1,174.74 is put at N878.8 million.
Importantly, this purchase increases the ownership percentage of Nestle S.A, this adds significantly to the multinational’s investment in the company as the parent company now owns 66.27% of Nestle Nigeria Plc.
The 66.27% ownership share of Nestle S.A. total amounts to 525, 307, 504 ordinary shares worth N617 billion out of the 792, 656, 252 shares outstanding.
Meanwhile, insiders’ transactions both sales and purchases are often an indication of how shareholders perceive the company’s valuation. It could also mean a possible capital raise or the majority shareholders strengthening their existing holdings.
About the company
Nestlé Nigeria PLC is one of the largest food and beverage companies in Africa. Nestlé Nigeria Plc engages in the manufacturing, marketing and distribution of food products including purified water. It also exports some of its products to other countries within Africa.
It has three product segments: Food, Beverages and seasoning. The Food segment engages in the production and sale of Cerelac, Nutrend, Nan, Lactogen and Golden Morn. The Beverages segment engages in the production and sale of Milo, Chocomilo, Nido, Nescafe and Nestlé Pure Life. While the seasoning segment engages in the sale of Maggi cubes.
Key takes on Nestle financials
Nairametrics had earlier published after perusing through the company’s half-year unaudited financial report that the increase in the cost of sales, Administrative expenses, low finance income coupled with high costs coloured the bottom line of the company as earnings per share dipped from N33.11 to N27.53.
This shows the knock-on-effect of the pandemic on a giant like Nestle, despite grappling hard to keep revenues flat year on year, the increase in key costs still ebbed earnings.