A former bank chairman called me after reading my last article on this matter.
“Edgar, what I can say for you is that you are very loyal to your friends, and that is good.”
In that article, I had waxed very optimistic about the immediate future of First Bank after it took the full hit from forbearance.
Mr. Otedola had led the board to take, in one fell swoop, over ₦900 billion in bad loans, leaving the bank with about a 92% drop in profits.
The former chairman—an extremely brilliant player with a very strong pedigree—took me through the technicalities of investing in First Bank at this time.
“Edgar, that is poor journalism. You are asking people to buy First Bank at this time.
The P/E ratio isn’t right, and the price, at about N50, is too expensive.”
He ended by saying, “I expect a 10% drop in the share price by Monday, and from there it should settle at about N25. Then it would be a brilliant buy at that price.”
I didn’t agree, but I didn’t argue or tell him so. I simply said, “Oh, you made a point.”
He said, “You should retract,” and I replied, “Yes, sir.”
I was not going to retract anything.
Throughout my stockbroking career, I have always been behavioural in my approach.
This saved my career.
I read Political Science and cannot do maths to save my life. In fact, I got a P7 in WAEC. So, to bridge this gap, I became more humanistic.
I looked at investor behaviour, studied trends, and linked them to basic share pricing—and voilà, I could take a stand.
Another thing I bet on is the quality of management and the board.
Once I see the board, I will tell my clients to run away. I don’t care what the technicals say—just run.
For others, I will say sit. Ride and die.
A board with, for example, Aig-Imoukhuede—I will say BUY long and ride.
So, on this First Bank matter, I placed my bet on Femi Otedola for reasons I have mentioned in previous articles, but will briefly restate.
A bank that bites the bullet in this way is a courageous bank.
Although the move was regulatory-driven and others took it in phases, this bank took it once and for all and went home to sleep.
This sends a fight-or-die-trying signal, which will augur well for the long-term investor.
After that conversation, I made it a point of duty to track the share price of First Bank.
I personally went to another resurging brand—BGL.
Didn’t know they were back?
I met with a very brilliant stockbroker who gave me the information I needed.
First Bank traded at N49 on January 26, around the time the announcement was made.
By Friday that week, it dropped to N47, and just as my former bank chairman friend predicted, it closed on Monday, February 2, at N41.05—falling the maximum allowed in a trading day.
But wait, sir. Before you swig the champagne, by Tuesday it had climbed back to N44.15, gaining 10% and closing at the full bid. (Full bid is when demand for a share exceeds what is available for sale.)
The brilliant broker I was speaking with—amid a flurry of activity caused by a deluge of client calls enquiring how to reopen their accounts with BGL—predicted that the price would hit N47 by the close of the week.
This trading behaviour shows the sturdiness of the bank and its shares.
An entity that has absorbed over N2 trillion in bad loans and is still pushing forward with confident arrogance can only be a safe bet for the long-term investor.
Mr. Otedola’s decision to ramp up his holdings from 11% to 18.2% tells me two things:
First, his confidence in the ship is rock solid.
Second, he needs the power of being the largest shareholder to push through the reforms required to give this elephant back its erection.
What does all this mean for the investor?
Nothing but a huge BUY signal for those willing to ride through this storm for massive gains later.
Let me conclude by categorically and confidently encouraging you to BUY the shares—and if it bites you, COME AND BEAT ME.
Thanks.
Duke of Shomolu
For too long First Bank has been run like a government concern; allowed to give loans that one would think will reinvent the wheel, only to be forever cleaning the books for fresh starts. I do hope that Mr. Femi Otedola will make a difference with his controlling ownership.