First Bank Nigeria Holdings (FBNH) closed with a loss of -6.6%, placing it at the third position in the NSE ASI for Thursday.
After the appointment of the new Managing Director/Chief Executive Officer (MD/CEO) for First bank Nigeria, Mr Gbenga Shobo, the CBN responded by re-instating Dr. Adesola Adeduntan as the MD and sacking all directors of the bank, as well as the parent company, FBN Holdings.
CBN stated that First bank Nigeria was of essential importance to the Nigerian banking sector given its historical significance, size of balance sheet, large customer base and high level of interconnectivity with other financial service providers, among others.
READ: CBN sacks board of directors of FBN Holdings, First Bank, reinstates Dr. Sola Adeduntan
With First Bank Nigeria holding over 31 million customers, and a deposit base of N42 trillion, the CBN took a decisive step to mitigate the damages of corporate misgovernance.
Despite the healthy balance sheet maintained by First Bank up until 2016, FBN was unable to successfully scale CBN’s target examination as it revealed grave financial condition with alarming capital adequacy ratio (CAR) and non-performing loan ratio (NPL) scoring below the acceptable parameters. Hence, the CBN justified its interference as a quest to stabilize the bank and maintain financial stability in the banking sector.
READ: CBN, First Bank on collision course over removal of MD/CEO
However, this intervention may have a substantial impact on the share price of FBNH as stock market traders expect a double-digit dip as the opening bell commences. Part of the concerns raised by the CBN was the issue of loans procured by favouritism, which failed to adhere to the terms for the restructuring of their credit facilities.
However, alternative views suggest that the removal of Oba Otudeko is welcomed by the investing community who view the former Chairman of the bank as a major reason why it has failed to deliver impressive shareholder value.
Shares of Honeywell Flour Mills, a consumer goods company owned by Oba Otudeko fell 3.76% on Thursday and could fall further by Friday when the market reopens as investors digest the impact of the CBN’s announcement and what this could mean for the survival of Honeywell.
Some analysts have opined that the CBN announcement may trigger an AMCON takeover of Honeywell Nigeria Plc if Oba Otudeko fails to repay his loans.
If share price of FBNH falls following removal of Otudeko as Chairman, it may as well signify that the investing public has little support for that removal. Oba Otudeko is seasoned investor and industrialist with winning relationship in relation to the First Bank Group. It is my considered opinion that Honeywell will overcome its trauma just as Dangote Flour did. I will search for more information regarding reversal of corporate decision to appoint an MD for FBN and the regulatory action of the CBN. The CBN may need to explain more why retaining Onasanya as MD may be more beneficial compared to the collective decision of the Board. Regulatory functions should not overshadow corporate governance practices of which the appointment of an MD is chief. At this moment, my heart is with Dr. Oba Otudeko. This may be a real time for strategic re-appraisal regarding his business interests. I pray for quick turnaround for both Honeywell and the FBNH.